<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CEPHALON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 23-2484489
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
(610) 344-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------
BARBARA S. SCHILBERG
CEPHALON, INC.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
(610) 344-0200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
DAVID R. KING
MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE
PHILADELPHIA, PA 19103
(215) 963-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par value....... 1,524,000 shares $25.4375(1) $38,766,750.00 $11,745.00
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</TABLE>
(1) Based on the average of the reported high and low sales of the Common Stock
reported on the Nasdaq National Market System on January 20, 1997, estimated
solely for the purpose of calculating the registration fee pursuant to Rule
457(c).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED JANUARY 24, 1997
PROSPECTUS
1,524,000 SHARES
CEPHALON, INC.
COMMON STOCK
------------------------
The shares offered hereby (the "Shares") consist of shares of common stock,
$.01 par value per share ("Common Stock"), of Cephalon, Inc., a Delaware
corporation ("Cephalon" or the "Company"), which are being offered by the
selling stockholders listed herein under "Selling Stockholders" (collectively,
the "Selling Stockholders"). The Shares may be offered from time to time by the
Selling Stockholders. All expenses of registration incurred in connection
herewith are being borne by the Company, but all selling and other expenses
incurred by a Selling Stockholder will be borne by the Selling Stockholder. The
Company will not receive any of the proceeds from the sale of the Shares by the
Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the Nasdaq National
Market of The Nasdaq Stock Market at the market price then prevailing, although
sales may also be made in negotiated transactions or otherwise. The Selling
Stockholders and the brokers and dealers through whom sale of the Shares may be
made may be deemed to be "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), and their commissions or discounts
and other compensation may be regarded as underwriters' compensation. See "Plan
of Distribution."
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "CEPH." On January 20, 1997, the last reported closing price of the
Common Stock was $25.25 per share.
------------------------
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 4 THROUGH 15 HEREIN.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY , 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
regional offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Commission by mail at prescribed rates. Requests should be directed to the
Commission's Public Reference Branch, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material also may be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov). In
addition, such reports, proxy statements and other information concerning the
Company can be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described above. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the Commission.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File
No. 0-19119) with the Commission are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
(b) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
(c) Current Report on Form 8-K dated January 19, 1996.
(d) Current Report on Form 8-K dated February 12, 1996.
(e) Current Report on Form 8-K dated February 20, 1996.
(f) Current Report on Form 8-K dated March 14, 1996.
(g) Current Report on Form 8-K dated April 16, 1996.
(h) Current Report on Form 8-K dated May 7, 1996.
(i) Current Report on Form 8-K dated January 16, 1997.
(j) The description of the Company's Common Stock which is contained in its
Registration Statement on Form 8-A filed under the Exchange Act on
March 15, 1991, including any amendment or reports filed for the
purpose of updating such description.
(k) The description of rights to purchase Series A Junior Participating
Preferred Shares, par value $.01 per share, which is contained in the
Company's Registration Statement on Form 8-A filed under the Exchange
Act on November 22, 1993, including any amendment or reports filed for
the purpose of updating such description.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities remaining unsold, shall be
deemed
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<PAGE> 4
to be incorporated by reference herein and to be a part hereof from the date of
the filing of such reports and documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral requests for copies should be
directed to Jason Rubin, Vice President, Corporate Communications, Cephalon,
Inc., 145 Brandywine Parkway, West Chester, PA 19380, (610) 344-0200.
------------------------
Myotrophin(R) and Provigil(R) are trademarks of Cephalon, Inc. Cephalon has
registered or filed applications to register the trademarks in the United States
and certain other countries. All other trademarks and registered marks used in
this Prospectus are the property of their respective holders.
Unless the context otherwise requires, "Cephalon" or the "Company" refers
to Cephalon, Inc. and its wholly-owned subsidiaries.
3
<PAGE> 5
THE COMPANY
Cephalon seeks to discover and develop pharmaceutical products for the
treatment of neurological disorders. The Company's research and development
efforts focus primarily on neurodegenerative diseases, which are characterized
by the death of neurons, the specialized conducting cells of the nervous system.
The Company utilizes its technical expertise in molecular biology, molecular
pharmacology, biochemistry, cell biology and chemistry to develop products in
three core technologies: neurotrophic factors, protease inhibitors and tyrosine
kinase modulators and transcriptional regulators. Cephalon believes that its
multidisciplinary technology approach provides the basis for the development of
a portfolio of potential products for the treatment of neurodegenerative
disorders such as amyotrophic lateral sclerosis ("ALS" or "Lou Gehrig's
disease"), peripheral neuropathies, Alzheimer's disease, head and spinal injury
and stroke.
Cephalon's business strategy includes forming alliances with other
pharmaceutical companies where collaborations can provide strategic advantages
in technological, financial, marketing, manufacturing and other areas. In these
arrangements, the Company seeks, where appropriate, to retain the rights to
co-promote or otherwise share in the marketing of products, particularly to
neurologists. The Company also seeks to selectively in-license late stage
compounds for development.
The Company has established a 35-person sales organization in the United
States focusing on neurologists, which is presently co-promoting two
Bristol-Myers Squibb Company ("BMS") proprietary products, Stadol NS(R)
(butorphanol tartrate), for the management of pain when the use of an opioid
analgesic is appropriate, and Serzone(R) (nefazodone hydrochloride), which is
indicated for the treatment of depression.
The Company has not received approval from any regulatory authority to
market any drug candidate developed by the Company, and there can be no
assurance that the Company will successfully commercialize any of its potential
products.
Cephalon was incorporated in Delaware in August 1987. The Company's
executive offices and research facility are located at 145 Brandywine Parkway,
West Chester, PA 19380, and its telephone number is (610) 344-0200.
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following factors in evaluating the Company and
its business before purchasing any of the Common Stock offered hereby.
UNCERTAINTIES RELATED TO MYOTROPHIN(R) (rhIGF-I) PHASE III CLINICAL TRIAL
RESULTS
The Company is developing MYOTROPHIN (rhIGF-I) in collaboration with Chiron
Corporation ("Chiron") for use in the treatment of ALS and other neurological
disorders. During 1995, the Company and Chiron announced that, based on their
analysis and interpretation of data from two Phase III studies of MYOTROPHIN
(rhIGF-I) in patients suffering from ALS, MYOTROPHIN (rhIGF-I) 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 United States Food and Drug Administration (the "FDA") in support
of a treatment investigational new drug application ("T-IND") to permit the
Company and Chiron to provide expanded access to MYOTROPHIN (rhIGF-I) by
patients in the United States suffering from ALS. The T-IND process was
developed by the FDA to make available promising investigational drugs with
sufficient evidence of safety and effectiveness to treat patients with serious
or immediately life-threatening diseases, where no comparable or satisfactory
alternative therapies exist. 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 referred the application to the Peripheral and Central Nervous
System Drugs Advisory Committee (the "Advisory Committee"), which held a public
hearing in June 1996 to review data from both
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studies for purposes of recommending to the FDA whether there was sufficient
evidence to support use of MYOTROPHIN (rhIGF-I) under a T-IND. At the hearing,
representatives of the FDA indicated their disagreement with the Company's
various analyses of the European study and their opinion that the study failed
to support the results of the North American study. At the conclusion of the
Advisory Committee hearing, the panel members unanimously recommended approval
of the T-IND.
The FDA approved the T-IND application on June 19, 1996. The FDA's approval
letter noted the views of several Advisory Committee members at the hearing,
including the chairman, concerning the need for an additional study to support a
New Drug Application ("NDA"), and invited Cephalon and Chiron to work with the
FDA to develop plans for future studies. The Company continues to believe that
the two completed studies show the beneficial treatment effect of MYOTROPHIN
(rhIGF-I) in ALS patients, particularly those with more rapidly progressing
disease and, in collaboration with Chiron, is preparing to file a NDA with the
FDA requesting that MYOTROPHIN (rhIGF-I) be approved for the treatment of ALS in
the United States. In connection with its review of the NDA, the FDA may seek
the Advisory Committee's recommendation as to the safety and efficacy of
MYOTROPHIN (rhIGF-I) in the treatment of ALS. The Company has indicated its
willingness to conduct additional studies of MYOTROPHIN (rhIGF-I) as a post-
approval activity, although preliminary activities may be initiated before any
decision is made by the FDA on an NDA for MYOTROPHIN (rhIGF-I).
There can be no assurance that the FDA will ultimately grant authorization
to commercialize MYOTROPHIN (rhIGF-I) in the United States on the basis of the
results of the two completed studies. If the FDA were to require additional data
prior to approval of MYOTROPHIN (rhIGF-I) for commercialization, there can be no
assurance that Cephalon and Chiron would be willing or able to conduct either
the planned study described above or any other study as a Phase III activity or
that the results of such study, if conducted, would be positive. Any new study
would be expensive and would take several years to complete.
Based on the Company's review to date of the safety data from the two Phase
III studies, the Company believes that MYOTROPHIN (rhIGF-I) 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 (rhIGF-I)-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 (rhIGF-I). 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 that mortalities observed in its clinical studies are due to
the normal progression of the disease or other circumstances not attributable to
MYOTROPHIN (rhIGF-I). FDA regulations require the reporting of all patient
adverse events experienced in ongoing trials. The Company is continuing to
furnish MYOTROPHIN (rhIGF-I) to patients who participated in the ALS studies, to
patients in its Phase II program in peripheral neuropathies, and to patients
under the recently initiated T-IND program. There can be no assurance that
adverse events will not occur and that the reporting of any such events will not
result in any subsequent FDA action adverse to the Company.
The efficacy and safety data from the North American and European studies
of MYOTROPHIN (rhIGF-I) have not yet been formally 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 positive studies might be required to be completed and
submitted before MYOTROPHIN (rhIGF-I) could be marketed in such territories.
There can be no assurance that any regulatory authority will accept the
North American and European studies as evidence of sufficient safety and
efficacy to support marketing approval or that MYOTROPHIN (rhIGF-I) will receive
marketing approval in any jurisdiction for any indication. A delay in obtaining
approval or a failure to obtain any approval for MYOTROPHIN (rhIGF-I) would
seriously adversely affect the Company's business and the price of its common
stock. See "Volatility of Stock Price; No Dividends".
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UNCERTAINTIES RELATED TO PROVIGIL(R) (MODAFINIL) PHASE III CLINICAL TRIAL
RESULTS
During the first quarter of 1996, the Company announced positive results
from two Phase III studies of PROVIGIL (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. The Company recently submitted an NDA with the FDA requesting that
PROVIGIL (modafinil) be approved for the treatment of the excessive daytime
sleepiness associated with narcolepsy. The FDA must determine that the NDA is
complete before it begins a review of the data. Even if the NDA is accepted for
filing and review by the FDA, there can be no assurance that the FDA or other
regulatory authorities will agree with the Company's opinion that the results
generated from the Company's clinical trials demonstrate sufficient safety and
efficacy data to allow marketing approval.
Lafon has filed for marketing approval of modafinil in certain countries
within the European Union through the multi-state procedures promulgated by the
Committee for Proprietary Medicinal Products ("CPMP"). Applications based on the
CPMP application are being pursued by the Company separately from the CPMP
process in the United Kingdom and the Republic of Ireland, territories included
in Cephalon's license from Lafon. The Company expects that, even if those
applications are approved, the Company must also request permission to vary the
application with respect to certain manufacturing procedures and other matters.
There can be no assurance that any regulatory approvals or variations will be
obtained at all or in a timely manner. The Company is in the process of
establishing a sales force in the U.K. and Ireland to sell PROVIGIL (modafinil).
Any delays in accomplishing these activities could delay launch of the product,
if it is approved.
UNCERTAINTIES RELATED TO PRODUCT DEVELOPMENT, REGULATORY APPROVAL AND
MARKETABILITY
The success of the Company depends to a large degree upon obtaining FDA and
foreign regulatory approval to market products currently under development.
Cephalon has had only limited experience in filing and pursuing applications
necessary to gain regulatory approvals. The Company's analysis and
interpretation of the results of the Company's clinical studies is subject to
confirmation and interpretation by regulatory authorities, which may differ from
the Company's analysis. There can be no assurance that the data or the Company's
interpretation of data will be accepted by any regulatory authorities. In
addition, there can be no assurance that any application by the Company to
market a product will be reviewed in a timely manner, or that approval to market
a product will be received from the appropriate regulatory authority.
Before obtaining required regulatory approvals for the commercial sale of
products under development, the Company must demonstrate through preclinical and
clinical studies that such products are safe and efficacious for use in each
target indication. TAP Holdings Inc. ("TAP") has begun a Phase I clinical study
of a compound being developed in collaboration with the Company for the
treatment of various cancers, including prostate cancer. The objective of the
multi center study is to examine the drug's pharmacokinetic and safety profile
in patients with advanced cancer. Because the compound has never been tested in
humans, the risk of safety problems is unknown. There can be no assurance that
the compound will prove to be safe as administered to humans or that it will
show any therapeutic benefit.
The results of preclinical and initial clinical trials of products under
development by the Company are not necessarily predictive of results that will
be obtained from large-scale clinical testing, and there can be no assurance
that clinical studies of products under development will demonstrate the safety
and efficacy of such products or will result in a marketable product. The safety
and efficacy of a therapeutic product under development by the Company generally
must be supported by statistically significant positive results from Phase III
clinical trials, and the failure to obtain such results could prevent regulatory
approval of the product, which would have a material adverse effect on the
Company. Even if the FDA and foreign regulatory approvals for the marketing of
any products developed by the Company are obtained, there can be no assurance
that such products will be accepted and prescribed by physicians.
The administration of any product developed by the Company may produce
undesirable side effects in humans. The occurrence of such side effects could
interrupt or delay clinical studies of such products and could ultimately
prevent their approval by the FDA or foreign regulatory authorities for any or
all targeted
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indications. The Company or the FDA may suspend or terminate clinical trials at
any time if it is believed that the people participating in such trials are
being exposed to unacceptable health risks. Even after approval by the FDA and
foreign regulatory authorities, products may later exhibit adverse effects that
prevent their widespread use or necessitate their withdrawal from the market.
There can be no assurance that any products under development by the Company
will be safe when administered to patients.
The results of clinical studies of product candidates under development by
the Company which are conducted by collaborators of the Company, including
studies of rhIGF-I being conducted by the Company's licensee in Japan and
clinical studies of modafinil being conducted by Lafon and its licensees 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, which could have a material adverse effect on the
Company.
NEED FOR ADDITIONAL FUNDS
The Company has incurred negative cash flows from operations for each year
since its inception. The Company expects its negative cash flow to increase
substantially in the future due to higher research, development, clinical trial,
regulatory filing, and other costs. The Company also has begun to expand its
selling, general and administrative activities in the United States and Europe.
The Company will assess the degree of expansion and funding required in those
areas as the Company evaluates the potential for obtaining regulatory approvals
of MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil). Any such expansion would
require substantial funding. Similarly, the Company will assess the need to
build inventories of MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil), which would
require substantial funding. The Company anticipates that the capital required
to fund the Company's operations for the next year will be greater than that of
the prior year. The amount needed to fund operations will depend upon many
factors, including the success of the Company's research and development
programs, the extent of any collaborative research or other funding
arrangements, the costs and timing of seeking regulatory approvals, if any, of
its products, technological changes, competition and the success of the
Company's sales and marketing activities. Schering-Plough Corporation
("Schering") recently decided to conclude its funding of the research program
with the Company related to amyloid protease inhibitors and Alzheimer's disease.
The Company intends to continue the program using its own resources. Under the
terms of its agreement with Schering, the Company may not conduct the same
research program with a third party until the end of 1997.
If the Company is required to make the Milestone Payment (as defined below
under "Partnership Purchase Option") and elects to do so in cash, or if it
elects to exercise its contractual option to purchase the limited partnership
interests in Cephalon Clinical Partners, L.P. (the "Partnership") for cash, as
described below under "Partnership Purchase Option," the Company will be
required to make a substantial cash payment. The Company repurchased some
limited partnership interests outside of the Purchase Option (as defined below
under "Partnership Purchase Option") in 1995 and may consider the purchase of
additional interests. If the Company elects to purchase some or all of the
partnership interests, significant funds could be required. Further, the Company
is obligated under various debt instruments to make principal and interest
payments to various state agencies and banks. Many of these agreements contain
restrictive covenants relating to, among other things, the maintenance of
minimum levels of working capital and limitations on the incurrence of
additional indebtedness that may limit the Company's flexibility in utilizing
its existing financial resources.
To satisfy its capital requirements, the Company may seek to access the
public or private equity markets whenever conditions are favorable. The Company
also intends to seek additional funding through corporate collaborations and
other financing vehicles, potentially including "off-balance sheet" financings
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. If
adequate funds are not available, the Company may be required to significantly
curtail one or more of its research or development programs or obtain funds
through arrangements with existing or future collaborative partners or others
that may require the Company to relinquish rights to certain of its
technologies, product candidates or products.
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HISTORY OF OPERATING LOSSES
The Company has not received revenue from the sale of any product developed
by the Company, and has accumulated aggregate losses of $153,081,000 from
inception through September 30, 1996. The Company expects to continue to incur
operating losses unless and until such time as product approvals are obtained
and product sales, if any, exceed operating expenses. The Company expects to
have significant fluctuations in quarterly results based on the level and timing
of recognition of contract revenues and the incurrence of expenses. A majority
of the Company's revenues to date have been under agreements with collaborative
partners and the Partnership. See "Dependence on Collaborative Partners." Since
the formation of the Partnership, the Partnership has funded a significant
portion of the expenses related to the development of MYOTROPHIN (rhIGF-I). Due
to the funding limitations of the Partnership, the Company will not recognize
any future revenue from this source. In addition, if the Company elects to make
the Milestone Payment, exercise the Purchase Option or offer to purchase any
additional partnership interests outside of the Purchase Option, a material
charge to earnings would result.
The Company and Chiron are currently developing MYOTROPHIN (rhIGF-I) for
the treatment of ALS and certain peripheral neuropathies. The costs of the
program are shared equally by the partners. Depending on the relative costs
incurred by the two companies, the Company may incur expenses in the form of
payments to Chiron.
The Company receives funding to support its research and development
activities conducted in collaboration with SmithKline Beecham plc ("SB"),
related to calpain inhibitors, and with TAP, related to the use of certain
tyrosine kinase effectors in the treatment of prostate diseases. The funding
levels under these agreements are based on a contract rate for each Cephalon
employee assigned to the program. The annual level of funding under each
agreement is subject to the approval of the Company's collaborator. Under the
agreements, TAP may terminate funding of the prostate disease program under
certain circumstances, and SB may terminate funding of the calpain program at
any time upon 30 days notice. There can be no assurance that these research
programs will be continued or that the Company's expenses incurred in any of
these programs will be fully reimbursed by its collaborator.
MANUFACTURING UNCERTAINTIES AND RELIANCE ON THIRD-PARTY SUPPLIERS
The Company's ability to conduct clinical trials on a timely basis, to
obtain regulatory approvals and to commercialize its products will depend in
part upon its ability to manufacture its products, either directly or through
third parties, at a competitive cost and in accordance with applicable FDA and
other regulatory requirements, including GMP regulations.
The MYOTROPHIN (rhIGF-I) currently being used in ongoing clinical trials
was produced at the Company's manufacturing facility in Beltsville, Maryland
(the "Beltsville Facility"). Chiron has completed a U.S. manufacturing facility
to produce recombinant proteins at which the collaboration is producing
MYOTROPHIN (rhIGF-I) (the "Chiron Facility"). In November 1996, Cephalon sold
the Beltsville Facility to North American Vaccine, Inc. As a result, once the
existing inventory of material from the Beltsville Facility has been depleted,
the Chiron Facility will be the sole source of supply for any commercial or
clinical needs of MYOTROPHIN (rhIGF-I), including any material which Cephalon
may have to supply for commercial or clinical use in Japan, as well as for use
in ongoing clinical trials.
There can be no assurance that Chiron will be able to produce adequate
quantities of MYOTROPHIN (rhIGF-I) in a cost-effective manner or, in the case of
material purchased by Cephalon for use outside the collaboration, on terms
satisfactory to Cephalon. The Company and Chiron 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 the
material is equivalent, if bioequivalence cannot be demonstrated to the
satisfaction of regulatory authorities, regulatory approval of MYOTROPHIN
(rhIGF-I) could be delayed. The Chiron Facility will be the Company's and the
collaborator's only source of bulk MYOTROPHIN (rhIGF-I). Should that facility
fail to operate for any reason or not be able to produce sufficient quantities
of MYOTROPHIN (rhIGF-I) in accordance with applicable regulations, the
collaboration would have to obtain MYOTROPHIN (rhIGF-I) from another source.
There can be no assurance that the
8
<PAGE> 10
collaboration would be able to locate an alternative, cost-effective source of
supply of MYOTROPHIN (rhIGF-I).
The manufacturing facilities of Chiron used to produce MYOTROPHIN (rhIGF-I)
are required to comply with all applicable FDA requirements, including GMP
regulations, and are subject to FDA inspection to determine compliance with
those requirements. There can be no assurance that the manufacturing facilities
for MYOTROPHIN (rhIGF-I) will comply with applicable requirements.
If Chiron ceases its participation in the collaboration, Cephalon, under
certain circumstances, would have the right to purchase supplies of the products
of the collaboration from Chiron or it could have the manufacturing technology
transferred to Cephalon, on a royalty basis. There can be no assurance that
supplies of products could be obtained from Chiron on a cost-effective basis,
that Cephalon would be able to manufacture the products itself in a
cost-effective manner and without an interruption of supplies or that a suitable
alternative source of MYOTROPHIN (rhIGF-I) could be located. Failure to locate
an alternative supply of MYOTROPHIN (rhIGF-I) could result in significant costs
and delays to the program and have a material adverse effect on the Company.
Furthermore, the Company is aware of patents and patent applications owned by
third parties that may cover certain aspects of Chiron's current method of
manufacturing MYOTROPHIN (rhIGF-I). See "Patents and Proprietary Technology".
Kyowa Hakko Kogyo Co. Ltd. ("Kyowa Hakko") and Lafon are responsible for
manufacturing bulk compounds under the Company's respective agreement with each
company. The facilities used for manufacture of drug substance are required to
comply with all applicable FDA requirements, and are subject to FDA inspection
both before and after NDA approval. There can be no assurance that the
facilities or the material produced by Kyowa Hakko or Lafon will comply with
regulatory standards or that sufficient quantities will be available to meet the
Company's needs. If Lafon or Kyowa Hakko is unable to supply the Company with
the applicable compound, Cephalon is permitted to make the compound itself or to
purchase it from third parties. There can be no assurance that Cephalon will be
able to manufacture any such compound, that a third-party manufacturer can be
located or that either alternative will be cost-effective.
The Company will be responsible for producing tablets or other forms of
finished product from the bulk compounds produced by Lafon and Kyowa Hakko. The
Company is also responsible for the synthesis of compounds for use in clinical
trials using chemical intermediates supplied by Kyowa Hakko. The Company has
entered into an agreement with a U.S. manufacturer to scale-up the synthetic
process developed by the Company. There can be no assurance that a
cost-effective commercial manufacturing process can be developed. The Company
has also entered into an agreement with a third party to manufacture tablets for
commercial use from bulk modafinil provided by Lafon. There can be no assurance
that such manufacturer will be able to make sufficient quantities of tablets, in
accordance with appropriate FDA guidelines, including GMP, in a cost effective
manner. Should such manufacturer be unable to supply formulated tablets for any
reason, there can be no assurance that the Company would be able to identify a
suitable alternative supplier at all or without delaying the commercial launch
of PROVIGIL (modafinil).
Under the Company's agreement with TAP, the Company is obligated to provide
finished product for use in clinical trials and ultimately for commercial
purposes. The Company has contracted with a third party supplier to manufacture
material for use in clinical trials. The Company has not contracted for
synthesis of product for commercial use. There can be no assurance that the
Company can contract with a facility to manufacture finished products or enter
into a suitable third-party manufacturing arrangement for its commercial needs.
DEPENDENCE ON COLLABORATIVE PARTNERS
The Company's collaborations with Chiron, SB, Kyowa Hakko, TAP and others
provide the Company with research funding, rights to technology and development,
marketing and manufacturing resources. These arrangements are subject to certain
rights of termination by the collaborator.
There can be no assurance that any funds received under these arrangements
will be sufficient, individually or in the aggregate, to cover the costs
incurred by the Company in support of the related
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<PAGE> 11
collaborative programs. Moreover, the amount and timing of resources to be
devoted to these activities by such partners is not within the control of the
Company. There can be no assurance that the interests of the Company will
continue to coincide with those of its collaborators or that the collaborators
will not develop products independently or with third parties which could
compete with the Company's products, or that disagreements over rights to
technology or other proprietary information will not occur. Further, there can
be no assurance that the collaborative agreements will be extended at the end of
their respective terms. If any of the Company's collaborators breaches or
terminates its agreement with the Company, or otherwise fails to conduct its
collaborative activities in a timely manner, the development or
commercialization of the product candidate or research program under such
collaborative agreement may be delayed, the Company may be required to undertake
additional responsibilities or to devote previously unanticipated additional
resources to such development or commercialization, or such development or
commercialization could be terminated. Further, termination of the agreements
could result in the loss of certain technology rights. Any such event could
adversely affect the Company.
LIMITED SALES AND MARKETING EXPERIENCE; UNCERTAIN PRODUCT MARKETING AND
DISTRIBUTION ARRANGEMENTS
Cephalon has limited experience in the distribution, marketing and sale of
products. The Company has established a sales force in the United States which
initially is being used to co-promote Stadol NS and Serzone, approved products
of BMS, to neurologists in the United States. The co-promotion agreement expires
at the end of 1998 unless BMS and Cephalon elect to renew the arrangement. There
can be no assurance that additional products will be available for sale by the
Company's sales force or that Cephalon's sales and marketing efforts will be
successful. With respect to those products under development by Cephalon for
which it has retained marketing rights, Cephalon may choose to augment any of
its own sales efforts through sales and marketing arrangements with other
pharmaceutical companies. There can be no assurance that such marketing
arrangements will be available at all or on terms satisfactory to Cephalon or
that such arrangements will lead to the successful commercialization of
products.
Cephalon does not have a sales, marketing or distribution organization
outside the United States. The Company is in the process of establishing a sales
and marketing capability in Europe. There can be no assurance that the Company
will be able to establish a commercially viable sales, marketing and
distribution capability outside the United States in a timely or cost-effective
manner or at all. Under the collaborative agreement with Chiron, the Company
believes that the existing Chiron distribution infrastructure will be used for
MYOTROPHIN (rhIGF-I). The Company is evaluating alternatives for the
distribution of its other product candidates. The Company's agreement with Lafon
requires the Company to commence sales and marketing activities within three
months after receiving approval to market modafinil in the United Kingdom and
the Republic of Ireland. If the Company fails to initiate such activities within
the specified time frame, its license could be terminated by Lafon in the
applicable country.
PATENTS AND PROPRIETARY TECHNOLOGIES
The degree of the Company's success depends in part on its ability to
obtain patents, maintain trade secret protection and operate without infringing
on the proprietary rights of third parties. The Company believes that patent
protection of products or processes that may result from the research and
development efforts of the Company, its licensees or its collaborators also is
important to the potential commercialization of the Company's product
candidates. The Company has filed various applications for U.S. and foreign
patents, has licensed various U.S. and foreign patent applications from third
parties, and owns or licenses certain U.S. and foreign patents. With regard to
MYOTROPHIN (rhIGF-I), the Company believes that the composition of rhIGF-I is in
the public domain and therefore cannot be patented under a composition-of-matter
patent. However, Cephalon has filed several patent applications and owns three
issued U.S. patents covering the use of rhIGF-I for various therapeutic uses. In
addition, Cephalon has filed patent applications covering certain aspects of the
current manufacturing process.
There can be no assurance that any of Cephalon's patent applications for
rhIGF-I uses will issue, that patents, if obtained, will be as broad in scope as
such patent applications or that the claims of any issued
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<PAGE> 12
patents will withstand challenge. Even in those jurisdictions where MYOTROPHIN
(rhIGF-I) is or may be covered by the claims of a use patent, "off-label" sales
might occur, especially if another company markets rhIGF-I for other uses at a
price that is less than the price of MYOTROPHIN (rhIGF-I), thereby potentially
reducing sales of MYOTROPHIN (rhIGF-I). It is not always possible to detect
"off-label" sales and therefore enforcement of use patents can be difficult.
Furthermore, some jurisdictions outside of the United States restrict the manner
in which patents claiming uses of a product may be enforced.
Under its collaboration with Chiron, the Company has obtained a license
under certain patent rights of Chiron related to rhIGF-I, including patents and
patent applications covering the manufacture of recombinant proteins such as
rhIGF-I. One of Chiron's issued patents related to certain methods for the
manufacture of recombinant proteins, including rhIGF-I, is currently the subject
of an interference proceeding before the U.S. Patent and Trademark Office
("USPTO") involving patent applications owned by an unrelated third-party. It is
not known when or how the USPTO will ultimately conclude the interference
proceeding. Another related patent application of Chiron, which may cover the
Company's current process and Chiron's intended process for manufacturing
rhIGF-I, was the subject of another interference proceeding. Chiron prevailed in
the interference proceeding and the decision was the subject of a district court
appeal by the other party. Chiron prevailed in the district court proceeding,
and the other party has appealed that decision to the Court of Appeals for the
Federal District. There can be no assurance that Chiron will prevail in any
appeal of the decision. The Company is aware of other patents and patent
applications owned by third parties, which patents and patent applications, if
issued with the claims as filed, may cover certain aspects of the current method
of manufacturing rhIGF-I. The Company and Chiron intend to either seek licenses
under any valid patents related to the manufacturing of rhIGF-I as required or,
alternatively, modify the manufacturing process. There can be no assurance that,
if required, such licenses can be obtained at all or on acceptable terms or that
a modified manufacturing process can be implemented at all or without
substantial cost or delay. If neither approach were feasible, the Company could
be subject to a claim of patent infringement which, if successful, could prevent
the Company from manufacturing or selling MYOTROPHIN (rhIGF-I) in the United
States. In such event, the Company could be materially adversely affected.
The Company is aware of a published application filed under the Patent
Convention Treaty, designating the United States, that relates to the use of
IGF-1 in treating certain disorders of the nervous system. The Company believes
that even if the subject matter were deemed to overlap the subject matter of a
patent application filed by the Company in the United States, based on the
filing date of the third party's application, it would not take priority over
the Company's application. Further, the Company believes that a third party has
filed a U.S. patent application which may contain a claim which, if issued,
might broadly cover the use of rhIGF-I to treat many neurological conditions,
including ALS and peripheral neuropathies. Patent counsel to the Company has
advised the Company that, in its opinion, such a claim would not be patentable.
If such a claim should issue, the Company could be prevented from selling
MYOTROPHIN (rhIGF-I) in the United States for use in treating ALS or peripheral
neuropathy unless it obtained a license to the patent. The third-party patent
application might also contain a narrower claim covering the use of rhIGF-I to
treat diabetic neuropathy. If such a claim should issue, the Company could be
prevented from selling MYOTROPHIN (rhIGF-I) in the United States for use in
treating diabetic neuropathy unless it obtained a license to the patent. The
owner of such third-party patent application has asserted for several years that
the subject matter claimed in its application interferes with claims of the
Company's patent with respect to the use of rhIGF-I in treating ALS. Patent
counsel has advised the Company that, in its opinion, no interference should be
declared between such third-party patent application and the Company's patent.
If an interference were declared and the third party prevailed, the Company
could be prevented from selling MYOTROPHIN (rhIGF-I) in the United States for
use in treating ALS and peripheral neuropathies unless it obtained a license to
the patent. There can be no assurance that any such licenses could be obtained
from the third party at all or on acceptable terms. Furthermore, one or more
claims of the Company's existing patent could be declared invalid.
Modafinil, which the Company has licensed from Lafon, is covered by the
claims of a composition-of-matter patent in the United States that expires in
1998 (under the transitional provisions of the General Agreement on Tariffs and
Trade ("GATT")). The Company plans to seek marketing exclusivity for
11
<PAGE> 13
modafinil's use in treating narcolepsy under the Orphan Drug Act and under the
Drug Price Competition and Patent Term Restoration Act of 1984 (the "DPC Act"),
and also may seek an extension of the patent under the DPC Act equal to one-half
the period of time elapsed between the filing of an IND for modafinil and the
filing of the corresponding NDA plus the period of time between the filing of
the NDA for modafinil and FDA approval. However, to obtain any such extension,
the Company must receive FDA approval of modafinil before expiration of the
original term of the patent. There can be no assurance that the Company will be
able to take advantage of the marketing exclusivity or patent extension benefits
of this statute.
The Company also owns or licenses issued patents and patent applications
related to its other product development programs. No assurance can be given
that any additional patents will issue on any of the patent applications owned
by the Company or licensed from third parties. Furthermore, even if such patents
issue, there can be no assurance that any issued patents will provide protection
against competitive products or otherwise be commercially valuable, or that
applications filed by others will not result in patents that would be infringed
by the manufacture, use or sale of the Company's products. In addition, patent
law relating to the scope of claims in the biotechnology field is still evolving
and the biotechnology patent rights of the Company are subject to this
additional uncertainty. There can be no assurance that others will not
independently develop similar products, duplicate any of the Company's products,
or, if patents are issued to the Company, design around any products developed
by the Company.
The products of the Company could infringe the patent rights of others. If
licenses required under any such patents or proprietary rights of third parties
are not obtained, the Company could encounter delays in product market
introductions, or could find that the development, manufacture or sale of
products requiring such licenses is foreclosed. In addition, patent litigation
is both costly and time-consuming, even if the outcome is favorable to the
Company. In the event that the Company is a defendant in such litigation, an
adverse outcome would subject the Company to significant liabilities to third
parties, require the Company to license disputed rights from third parties, or
require the Company to cease selling its products.
The Company also relies upon trade secrets and other unpatented proprietary
information in its product development activities. All of the Company's
employees have entered into agreements providing for confidentiality and the
assignment of rights to inventions made by them while employed by the Company.
The Company also has entered into non-disclosure agreements to protect its
confidential information delivered to third parties in conjunction with possible
corporate collaborations and other purposes. There can be no assurance that
these types of agreements will effectively prevent disclosure of the Company's
confidential information.
PARTNERSHIP PURCHASE OPTION
The Partnership has licensed to the Company the exclusive rights to
manufacture and market MYOTROPHIN (rhIGF-I) in the United States, Canada and
Europe (the "Territory") in return for certain royalty payments and a payment of
approximately $16,000,000 (the "Milestone Payment") if MYOTROPHIN (rhIGF-I)
receives regulatory approval in certain countries in the Territory. The
Milestone Payment is payable by the Company in cash, Common Stock or any
combination of the two.
Upon the occurrence of certain events, the Company has an option during a
specified period of time to purchase all the limited partnership interests in
the Partnership (the "Purchase Option") and thereby reacquire the Partnership's
rights to MYOTROPHIN (rhIGF-I). If the Company exercises the Purchase Option,
the Company will be required to make an advance payment of $40,275,000 in cash
or, at the Company's election, $42,369,000 in shares of Common Stock, or a
combination of cash and Common Stock in an amount between $40,275,000 and
$42,369,000, in accordance with a specified formula, to purchase the limited
partnership interests of the Partnership. A payment in cash would have a
significant adverse effect on the Company's capital resources. A payment in
shares of Common Stock would result in a decrease in the percentage ownership of
the Company's stockholders at that time. The exercise of the Purchase Option may
require the Company to record a significant charge to earnings.
If the Company does not exercise the Purchase Option, its interim license
will terminate and all rights to manufacture or market MYOTROPHIN (rhIGF-I) in
the Territory will revert to the Partnership, which may
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<PAGE> 14
then commercialize MYOTROPHIN (rhIGF-I) itself or license or assign its rights
to a third party. The Company would not receive any benefits from such
commercialization. There can be no assurance that disputes will not arise
between the Company and the Partnership over the parties' respective rights to
technology or their other rights and obligations under these arrangements.
TECHNOLOGICAL CHANGE AND COMPETITION
Competition in the Company's fields of interest from large and small
companies is intense and is expected to increase. Furthermore, academic
institutions, governmental agencies, and other public and private research
organizations will continue to conduct research, seek patent protection, and
establish collaborative arrangements for product development. Products developed
by any of these entities may compete directly with those developed by the
Company. Many of these companies and institutions have substantially greater
capital resources, research and development staffs and facilities than the
Company, and substantially greater experience in conducting clinical trials,
obtaining regulatory approvals and manufacturing and marketing pharmaceutical
products. These entities represent significant competition for the Company. In
addition, competitors developing products for the treatment of neurodegenerative
diseases might succeed in developing technologies and products that are more
effective than any being developed by the Company or that would render its
technology and products obsolete or noncompetitive. There can be no assurance
that competition and innovation from these or other sources will not materially
adversely affect any sales of products which might be developed by the Company
or make them obsolete. Advances in current treatment methods may also adversely
affect the market for such products. The approval and introduction of
therapeutic products that compete with compounds being developed by the Company
could also adversely affect the Company's ability to attract and maintain
patients in clinical studies for the same indication or otherwise successfully
complete its clinical studies.
With respect to MYOTROPHIN (rhIGF-I), Rilutek(R) (Riluzole) has been
approved in the U.S. and certain countries in Europe for the treatment of ALS.
In addition, the Company believes that other companies are developing
therapeutic agents for the treatment of ALS and peripheral neuropathies. Because
the potential patient population for ALS is limited, competition from other
products may adversely affect potential sales of MYOTROPHIN (rhIGF-I) and the
price of the Company's common stock.
Other companies are developing rhIGF-I as a therapeutic product for
diseases other than ALS or peripheral neuropathy, including Chiron, which is
evaluating rhIGF-I in a Phase II study for use in acute renal failure, and
Genentech which is evaluating IGF-I in diabetes. Notwithstanding the patents and
patent applications relating to MYOTROPHIN (rhIGF-I), if the sale of rhIGF-I by
third parties is approved for other indications, such products might be used in
competition with MYOTROPHIN (rhIGF-I) through "off-label" use, especially if
such product is priced below MYOTROPHIN (rhIGF-I).
With respect to PROVIGIL (modafinil), there are presently several products
used in the United States to treat narcolepsy. Although the Company believes
that PROVIGIL (modafinil) may have advantages over those products, such as a
lower abuse potential and reduced side effects, there can be no assurance that
the Company will be able to demonstrate the value of potential advantages of
PROVIGIL (modafinil) to prescribing physicians and their patients.
There are significant efforts by others, including many large
pharmaceutical companies and academic institutions, to develop therapeutic
products which may compete with the products being developed by the Company to
treat neurological disorders, including Alzheimer's disease, head and spinal
injury and stroke. Some of these products may be at a more advanced stage of
development than the Company's products.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends, in large part, upon the Company's
ability to attract and retain highly qualified scientific and management
personnel. The Company faces competition for such personnel
13
<PAGE> 15
from other companies, research and academic institutions, government entities
and other organizations. There can be no assurance that the Company will be
successful in hiring or retaining key personnel.
NO ASSURANCE OF ADEQUATE REIMBURSEMENT
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of such products and related treatment are obtained from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). Third-party payors are increasingly
challenging the prices charged for medical products and services. Also, the
trend towards managed health care in the United States and the concurrent growth
of organizations such as HMOs, which could control or significantly influence
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may all
result in lower prices for the Company's products. The cost containment measures
that health care providers are instituting and the effect of any health care
reform could affect the Company's ability to sell its products and may have a
material adverse effect on the Company.
There can be no assurance that reimbursement in the United States or
foreign countries will be available for any of the Company's products, or if
available, will not be decreased in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, the Company's products. The
unavailability or inadequacy of third-party reimbursement for the Company's
products would have a material adverse effect on the Company. Moreover, the
Company is unable to forecast what additional legislation or regulation, if any,
relating to the health care industry or third-party coverage and reimbursement
may be enacted in the future or what effect such legislation or regulation would
have on the Company's business.
POTENTIAL PRODUCT LIABILITY
The Company faces an inherent risk of exposure to product liability claims
if the use of its products is alleged to have resulted in an injury or adverse
effect on patients. Such risk exists with respect to products being tested in
human clinical trials, as well as products being developed by the Company, if
any, that receive regulatory approval for commercial sale. The Company maintains
product liability insurance for clinical studies. However, there can be no
assurance that such coverage will be adequate to cover claims, or that adequate
insurance coverage for future clinical or commercial activities will be
available at acceptable costs. There can be no assurance that the Company will
not experience a significant product liability claim or recall, which if
uninsured could have a material adverse effect on the Company.
VOLATILITY OF STOCK PRICE; NO DIVIDENDS
The market price for shares of the Company's Common Stock has historically
been highly volatile. Future negative announcements concerning the Company, its
competitors or other companies in the biopharmaceutical industry, including the
results of testing and clinical trials, regulatory hearings and decisions,
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 adverse effect on the market price of the Common Stock. The
Company has not paid any cash dividends on its Common Stock and does not
anticipate paying any dividends in the foreseeable future.
EFFECT OF EXERCISE OF OPTIONS AND WARRANTS
The Company grants stock options to employees, directors and consultants.
As of September 30, 1996, the Company had 2,910,157 outstanding options at
exercise prices ranging from $0.15 to $31.00 per share. In addition, at
September 30, 1996 warrants to purchase 2,959,620 shares of the Company's common
stock were outstanding at exercise prices ranging from $11.32 to $18.50 per
share. If all or substantially all such options and warrants were exercised, the
subsequent sale of the shares of Common Stock could adversely affect the price
of the Common Stock.
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<PAGE> 16
ANTI-TAKEOVER PROVISIONS
The ability of the Board of Directors of the Company to issue shares of
preferred stock without stockholder approval and a shareholder rights plan
adopted by the Company may, alone or in combination, have certain anti-takeover
effects. The Company also is subject to provisions of the Delaware General
Corporation Law which may make certain business combinations more difficult.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
15
<PAGE> 17
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of each Selling Stockholder and as adjusted to
give effect to the sale of the Shares offered hereby. The Shares are being
registered to permit public secondary trading of the Shares, and the Selling
Stockholders may offer the Shares for resale from time to time. See "Plan of
Distribution."
The Shares being offered hereby by the Selling Stockholders may be
acquired, from time to time, upon (i) the conversion of $30 million aggregate
principal amount of 7% Senior Convertible Notes due 1998 (the "Notes"), which
will be acquired by them from the Company following the effectiveness of the
Registration Statement of which this Prospectus forms a part in a private
placement transaction pursuant to those certain Note Purchase Agreements, dated
as of January 15, 1997 (the "Note Purchase Agreements"), (ii) the payment by the
Company of interest on the Notes in the form of Common Stock in lieu of cash
interest, and (iii) the exercise of warrants to purchase 84,000 shares of Common
Stock (the "Warrants"), which were acquired by certain of the Selling
Stockholders from the Company in connection with the sale of the Notes, pursuant
to that certain Engagement Agreement, dated November 4, 1996, between the
Company and Owen, Diaz & Altschul Securities LLC as placement agent. Once the
Commission has declared effective the Registration Statement of which this
Prospectus forms a part, the Notes, together with accrued and unpaid interest
thereon, are convertible into Common Stock at a conversion price equal to (i)
for the first 75 days after the effectiveness of the Registration Statement, the
greater of $25.00 and 94% of the low trade price of the Common Stock as reported
on the Nasdaq National Market of The Nasdaq Stock Market for the six consecutive
trading days immediately preceding the date of conversion, and (ii) thereafter,
94% of the low trade price of the Common Stock as reported on the Nasdaq
National Market of The Nasdaq Stock Market for the six consecutive trading days
immediately preceding the date of conversion. Pursuant to the terms of the
Notes, no holder can convert any portion of such holder's Notes if such
conversion would increase such holder's beneficial ownership of the Common Stock
(other than shares so owned through ownership of the Notes) to in excess of
4.9%. In addition, in no event will the Notes be convertible for an aggregate
number of shares of Common Stock which is equal to or greater than 20% of the
Company's outstanding shares of Common Stock. Once the Commission has declared
effective the Registration Statement of which this Prospectus forms a part, the
Warrants are exercisable into Common Stock at an exercise price of 130% of the
average closing bid price of the Common Stock for the five consecutive trading
days preceding the closing of the sale of the Notes. The Warrants expire three
years from the date of the closing of the sale of the Notes.
In recognition of the fact that Selling Stockholders may wish to be legally
permitted to sell their Shares when they deem appropriate, the Company has filed
with the Commission, under the Securities Act, a Registration Statement on Form
S-3, of which this Prospectus forms a part, with respect to the resale of the
Shares from time to time on the Nasdaq National Market of The Nasdaq Stock
Market or in privately-negotiated transactions and has agreed to prepare and
file such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until the Shares are no
longer required to be registered for the sale thereof by the Selling
Stockholders.
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<PAGE> 18
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
NUMBER OF AFTER OFFERING
NUMBER OF SHARES SHARES -------------------
NAME OF BENEFICIALLY OWNED BEING NUMBER OF
SELLING STOCKHOLDER PRIOR TO OFFERING OFFERED SHARES PERCENT
- -------------------------------------------- ------------------ ------------ --------- -------
<S> <C> <C> <C> <C>
AP/ODA Investors I, LLC..................... 192,000 192,000(1) 0 --%
The Hudson Partnership, L.P................. 96,000 96,000(1) 0 --%
Owen, Diaz & Altschul Fund I, Ltd. ......... 912,000 912,000(1) 0 --%
Stockwell Corporation, S.A. ................ 240,000 240,000(1) 0 --%
Owen, Diaz & Altschul Securities, LLC....... 70,753 70,753(2)(3) 0 --%
Dr. Michael Sorell.......................... 13,247 13,247(2) 0 --%
</TABLE>
- ---------------
(1) Represents the number of shares of Common Stock issuable upon conversion of
the Notes calculated using an assumed minimum conversion price of $20.83
based upon certain conversion provisions of the Notes (which price could
fluctuate from time to time based on changes in the market price of the
Common Stock).
(2) Represents shares of Common Stock issuable upon exercise of the Warrants.
(3) Owen, Diaz & Altschul Advisors, LLC, a New York limited liability company
("ODA Advisors"), serves as advisor to Owen, Diaz & Altschul Fund I, Ltd.
("ODA Fund"), AP/ODA Investors I, LLC ("AP/ODA") and The Hudson Partnership,
L.P. ("Hudson") and shares beneficial ownership of the securities
beneficially owned by such Selling Stockholders by reason of shared power to
dispose of the shares shown as beneficially owned by such Selling
Stockholders. ODA Advisors is under common control with Owen, Diaz &
Altschul Securities, LLC ("ODA Securities"). The amounts shown for ODA
Securities exclude the amounts shown for ODA Fund, AP/ODA and Hudson.
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholders may be sold from time
to time by the Selling Stockholders, or by pledgees, donees, transferees or
other successors in interest. Such sales may be made on one or more exchanges or
in the over-the-counter market (including the Nasdaq National Market of The
Nasdaq Stock Market), or otherwise at prices and at terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
The Shares may be sold by one or more of the following methods, including,
without limitation: (a) a block trade in which the broker-dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (d) face-to-face and other direct
transactions between a Selling Stockholder and purchasers without a
broker-dealer or other intermediary. In addition, a Selling Stockholder may,
from time to time, sell short the Common Stock of the Company, and in such
instances, this Prospectus may be delivered in connection with such short sale
and the Shares offered hereby may be used to cover such short sale. In effecting
sales, brokers, dealers or agents engaged by a Selling Stockholder may arrange
for other brokers, dealers or agents to participate. Such brokers, dealers or
agents may receive commissions or discounts from a Selling Stockholder in
amounts to be negotiated immediately prior to the sale. Such brokers, dealers
and agents and any other participating brokers, dealers or agents may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales. In addition, any securities covered by this Prospectus that
qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather than
pursuant to this Prospectus.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker, dealer, agent or underwriter
for the sale of shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker, dealer, agent
or underwriter, a supplemented Prospectus will be filed, if required, pursuant
to Rule 424(c) under the Securities Act, disclosing (a) the name of each such
broker-dealer, agent or underwriter, (b) the number of shares
17
<PAGE> 19
involved, (c) the price at which such shares were sold, (d) the commissions paid
or discounts or concessions allowed to such broker-dealer(s), agent(s) or
underwriter(s) or other items constituting compensation or indemnification
arrangements with respect to particular offerings, where applicable, (e) that
such broker-dealer(s), agent(s) or underwriter(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this Prospectus, as supplemented, and (f) other facts material to the
transaction.
Including and without limiting the foregoing, in connection with
distributions of the Common Stock, a Selling Stockholder may enter into hedging
transactions with broker-dealers and the broker-dealers may engage in short
sales of the Common Stock in the course of hedging the positions they assume
with such Selling Stockholder. A Selling Stockholder may also enter into option
or other transactions with broker-dealers that involve the delivery of the
Common Stock to the broker-dealers, who may then resell or otherwise transfer
such Common Stock. A Selling Stockholder may also loan or pledge the Common
Stock to a broker-dealer and the broker-dealer may sell the Common Stock so
loaned or upon a default may sell or otherwise transfer the pledged Common
Stock.
The Company is bearing all costs relating to the registration of the Shares
(other than fees and expenses, if any, of counsel or other advisers to the
Selling Stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Stockholder selling such Shares.
The Company has agreed to indemnify the Selling Stockholders in certain
circumstances, against certain liabilities, including liabilities arising under
the Securities Act. Each Selling Stockholder, other than those selling Shares
issuable upon exercise of the Warrants, has agreed to indemnify the Company and
its directors, and its officers who sign the Registration Statement against
certain liabilities, including liabilities arising under the Securities Act.
LEGAL OPINION
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
18
<PAGE> 20
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 4
Risk Factors.......................... 4
Use of Proceeds....................... 15
Selling Stockholders.................. 16
Plan of Distribution.................. 17
Legal Opinion......................... 19
Experts............................... 19
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,524,000 SHARES
CEPHALON, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
JANUARY , 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Chester, Commonwealth of Pennsylvania on the
23rd day of January, 1997.
CEPHALON, INC.
By: /s/ FRANK BALDINO, JR., PH.D.
------------------------------------
Frank Baldino, Jr., Ph.D.
Director, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person in so signing also makes,
constitutes and appoints Frank Baldino, Jr. and Bruce A. Peacock, and each of
them acting alone, his true and lawful attorney-in-fact, with full power of
substitution, to execute and cause to be filed with the Securities and Exchange
Commission, any and all amendments or post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, as the Registrant deems appropriate.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<C> <S> <C>
/s/ FRANK BALDINO, JR., PH.D. Director, President and Chief January 23, 1997
- ------------------------------------------ Executive Officer (Principal
Frank Baldino, Jr., Ph.D. Executive Officer)
/s/ BRUCE A. PEACOCK Director, Executive Vice January 23, 1997
- ------------------------------------------ President and Chief Operating
Bruce A. Peacock Officer
/s/ WILLIAM P. EGAN Director January 23, 1997
- ------------------------------------------
William P. Egan
/s/ ROBERT J. FEENEY, PH.D. Director January 23, 1997
- ------------------------------------------
Robert J. Feeney, Ph.D.
/s/ MARTYN D. GREENACRE Director January 23, 1997
- ------------------------------------------
Martyn D. Greenacre
/s/ KEVIN E. MOLEY Director January 23, 1997
- ------------------------------------------
Kevin E. Moley
/s/ HORST WITZEL, Dr.-ING. Director January 23, 1997
- ------------------------------------------
Horst Witzel, Dr.-Ing.
/s/ J. KEVIN BUCHI Senior Vice President, Finance January 23, 1997
- ------------------------------------------ and Chief Financial Officer
J. Kevin Buchi (Principal Financial and
Accounting Officer)
</TABLE>
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the estimated expenses of the issuance and
distribution of the securities offered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........................ $11,745
Legal Fees and Expenses.................................................... 25,000
Nasdaq Listing Fees........................................................ 17,500
Miscellaneous.............................................................. 5,000
-------
Total............................................................ $59,245
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Article
VII of the Registrant's Bylaws, requires the Registrant to indemnify directors
and officers of the Registrant or any other authorized representative against
expenses, judgments and any settlement amounts incurred in a third party
proceeding brought by reason of the fact that the person is an authorized
representative of the Registrant. The Bylaws also permit indemnification of
expenses incurred by an authorized representative in connection with a
proceeding brought in the name of the corporation. The Bylaws further specify
procedures for such indemnification. Section 145 also empowers the Registrant to
purchase and maintain insurance that protects its officers, directors, employees
and agents against any liabilities incurred in connection with their service in
such positions.
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND INDEX TO SUCH EXHIBITS AND
SCHEDULES
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C> <C>
4.1 -- Form of 7% Senior Convertible Note due 1998, without exhibits. (Exhibit 4.1)(1)
4.2 -- Form of 10 3/4% Debenture due 2013, without exhibits. (Exhibit 4.2)(1)
4.3 -- Form of Warrant to buy shares of the Registrant's Common Stock, without
exhibits. (Exhibit 4.3)(1)
5.1 -- Opinion of Morgan, Lewis & Bockius LLP regarding legality of securities being
registered.
10.1 -- Form of Note Purchase Agreement, dated as of January 15, 1997, between the
Registrant and the several purchasers of the Registrant's Senior Convertible
Notes, without exhibits. (Exhibit 10.1)(1)
23.1 -- Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed as
Exhibit 5.1 hereto).
23.2 -- Consent of Arthur Andersen LLP.
24.1 -- Powers of Attorney (included on the signature page).
</TABLE>
- ---------------
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K dated
January 16, 1997 and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration
II-1
<PAGE> 23
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Certificate of Incorporation, its Bylaws, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against a public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
------ -------- -------
<S> <C> <C> <C>
4.1 -- Form of 7% Senior Convertible Note due 1998, without exhibits.
4.2 -- Form of 10 3/4% Debenture due 2013, without exhibits.
4.3 -- Form of Warrant to buy shares of the Registrant's Common Stock,
without exhibits.
5.1 -- Opinion of Morgan, Lewis & Bockius LLP regarding legality of
securities being registered.
10.1 -- Form of Note Purchase Agreement, dated as of January 15, 1997, between
the Registrant and the several purchasers of the Registrant's Senior
Convertible Notes, without exhibits.
23.1 -- Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed
as Exhibit 5.1 hereto).
23.2 -- Consent of Arthur Andersen LLP.
24.1 -- Powers of Attorney (included on the signature page).
</TABLE>
<PAGE> 1
Morgan, Lewis & Bockius LLP
Counselors at Law
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telephone: (215) 963-5000
Fax: (215) 963-5299
January 23, 1997
Cephalon, Inc.
145 Brandywine Parkway
West Chester, Pennsylvania 19380
Re: Cephalon, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Cephalon, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of a registration statement on
Form S-3 (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), relating
to the public offering of an aggregate of 1,524,000 shares (the "Shares") of
the common stock, par value $.01 per share, of the Company (the "Common
Stock"), to be sold by the Selling Stockholders named in the Registration
Statement. Of the Shares, 1,440,000 Shares will be issued from time to time
upon (i) conversion of the Company's 7% Senior Convertible Notes due 1998 (the
"Conversion Shares") to be issued by the Company pursuant to several Note
Purchase Agreements, each dated as of January 15, 1997 (the "Purchase
Agreements"), between the Company and the purchasers named therein, and (ii)
the payment of interest on the Notes in the form of Common Stock in lieu of
cash (the "Interest Shares"). In addition, 84,000 Shares (the "Warrant
Shares") will be issued from time to time upon exercise of warrants (the
"Warrants") by certain of the Selling Stockholders.
In this connection, we have reviewed (a) the Registration Statement; (b) the
Company's Restated Certificate of Incorporation and Bylaws; (c) the Purchase
Agreements; (d) the Notes; (e) the Warrants; and (f) certain records of the
Company's corporate proceedings as reflected in its minute books. In our
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the original of all documents submitted to us as copies thereof.
Our opinion set forth below is limited to the General Corporation Law of the
State of Delaware.
<PAGE> 2
Cephalon, Inc.
January 23, 1997
Page 2
In our opinion, the Conversion Shares and the Interest Shares, when issued
pursuant to the terms of the Notes, and the Warrant Shares, when issued
pursuant to the terms of the Warrants, will be legally issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement and to all references to our firm in the Registration Statement. In
giving such consent, we do not thereby admit that we are acting within the
category of persons whose consent is required under Section 7 of the Act and
the rules and regulations of the Securities and Exchange Commission thereunder.
The opinion expressed herein is solely for your benefit and may be relied upon
only by you.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
<PAGE> 1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 5, 1996
included in Cephalon, Inc.'s Form 10-K for the year ended December 31, 1995 and
to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, PA
January 20, 1997
