<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997
REGISTRATION NO. 333-20321
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
AMENDMENT NO. 4
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
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)
---------------------
COPIES TO:
DAVID R. KING
MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE
PHILADELPHIA, PA 19103
(215) 963-5000
---------------------
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. [ ]
---------------------
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.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL 4, 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 April 2, 1997, the last reported closing price of the Common
Stock was $18.25 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 APRIL , 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/A-2 for the fiscal year ended December 31,
1996 filed with the Commission on April 4, 1997.
(b) Current Report on Form 8-K dated January 16, 1997.
(c) The Company's proxy statement related to its 1997 Annual Meeting of
Stockholders filed under the Exchange Act on March 26, 1997.
(d) 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.
(e) 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 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
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<PAGE> 4
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.
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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
four core technology areas: neurotrophic factors, protease inhibitors, signal
transduction modulators and regulators of gene transcription. 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 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 36-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. Two new drug applications ("NDA") have been submitted
by the Company to the Food and Drug Administration ("FDA"): one for the use of
MYOTROPHIN(R) (rhIGF-I) in treating ALS, and one for the use of PROVIGIL(R)
(modafinil) in treating the excessive daytime sleepiness associated with
narcolepsy. Additionally, marketing applications for PROVIGIL (modafinil) are
pending in the United Kingdom and the Republic of Ireland, and a marketing
authorization application for MYOTROPHIN (rhIGF-I) is being prepared for filing
in Europe. There can be no assurance that the applications will be approved or
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 REGULATORY
SUBMISSIONS
In 1995, the Company submitted to the FDA a treatment investigational new
drug application ("T-IND") to permit expanded access to MYOTROPHIN (rhIGF-I) by
patients in the United States suffering from ALS. 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 two Phase III studies, one conducted in North America and
one in Europe, 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.
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<PAGE> 6
The FDA approved the T-IND application on June 19, 1996. The FDA's approval
letter noted the views of several Advisory Committee members expressed at the
hearing, including the chairman, concerning the need for an additional study to
support an NDA, and invited Cephalon and Chiron Corporation ("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, filed an NDA with the FDA
in February 1997 requesting that MYOTROPHIN (rhIGF-I) be approved for the
treatment of ALS in the United States. 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. The FDA
has scheduled a meeting of the Advisory Committee to be held on May 8, 1997 to
review the NDA for MYOTROPHIN (rhIGF-I). The Company has indicated its
willingness to conduct additional studies of MYOTROPHIN (rhIGF-I) as a
post-approval activity. If the FDA were to require additional data prior to
approval of MYOTROPHIN (rhIGF-I) for commercialization, there can be no
assurance that the Company and Chiron would be willing or able to conduct any
study as a Phase III activity or that the results of such study, if conducted,
would be positive. A new study also would be expensive and would take several
years to complete.
Because ALS is a fatal disease, it is expected that some mortalities will
occur while conducting clinical trials in ALS patients. 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 the North American and European clinical studies
are due to the normal progression of the disease or other circumstances not
attributable to MYOTROPHIN (rhIGF-I). 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. FDA regulations require the
reporting of all patient adverse events (including deaths) experienced in
ongoing trials. There can be no assurance that any such event previously
reported by the Company, or which may occur in the future, will not delay or
prevent the approval of MYOTROPHIN (rhIGF-I) or result in any subsequent FDA
action adverse to the interests of 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. The companies are preparing a marketing
authorization application for filing in Europe. 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
materially adversely affect the Company's business and the price of the Common
Stock. See "Volatility of Stock Price; No Dividends".
UNCERTAINTIES RELATED TO PROVIGIL(R)(MODAFINIL) PHASE III REGULATORY
SUBMISSIONS
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, based on the results of two Phase III studies
conducted in the United States. There can be no assurance that the FDA or other
regulatory authorities will determine that the results generated from the
Company's clinical trials demonstrate sufficient safety and efficacy to permit
marketing approval.
The Company also is pursuing applications seeking authorization to market
PROVIGIL (modafinil) in the Republic of Ireland and the United Kingdom, which
are other territories licensed from Laboratoire L. Lafon ("Lafon"). The
regulatory authorities in both countries have requested that additional
information be provided with respect to the applications (which were filed by
Lafon under the multi-state procedures of the
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Committee for Proprietary Medicinal Products ("CPMP")). There can be no
assurance that the Company will be able to provide sufficient additional
information in order to permit approval of the applications. Even if those
applications are approved, the Company must also request permission to vary the
applications 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 the Republic of Ireland to sell
PROVIGIL (modafinil). Any delays in accomplishing these activities could delay
launch of the product, if it is approved. The Company is required, under the
terms of its license with Lafon, to launch the product no later than three
months after approval.
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 authority. 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.
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 in 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 MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil) are approved for
commercialization, the Company can not predict at this time the potential
revenues to be received from sales of MYOTROPHIN (rhIGF-I) for use in treating
ALS or from sales of PROVIGIL (modafinil) for use in connection with narcolepsy.
Once approved, there can be no assurance that such products will be accepted and
prescribed by physicians. Moreover, 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.
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 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
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Company's product approval applications. Negative results from trials by third
parties or negative assessments from regulatory authorities would adversely
affect the Company's business and the price of its Common Stock. See "Volatility
of Stock Price; No Dividends."
NEED FOR ADDITIONAL FUNDS
The Company expects its negative cash flow to continue due to funding of
research, development, clinical trial, regulatory filing and other costs. In
addition, selling, general and administrative activities in the United States
and Europe may be expanded as the Company evaluates the potential for obtaining
regulatory approvals of MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil). Any such
expansion would require substantial funding. The Company may also build
inventories of MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil), which also would
require substantial funding. The capital required to fund the Company's
operations for 1997 may 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.
In August 1992, Cephalon exclusively licensed to Cephalon Clinical
Partners, L.P. (the "Partnership") rights to MYOTROPHIN (rhIGF-I) for human
therapeutic use within the United States, Canada and Europe (the "Territory") in
return for a non-refundable license fee of $500,000. Through a concurrent
offering of 900 limited partnership interests, the Partnership raised
approximately $38,714,000 in net proceeds (payable to the Partnership in annual
installments, the last of which was paid in August 1995) which it used to fund
the development of MYOTROPHIN (rhIGF-I). The Partnership exhausted its available
funding in 1995. Since that time, the Company has been funding the continued
development of MYOTROPHIN (rhIGF-I) from its own cash resources. The Partnership
granted the Company an exclusive license (the "Interim License") to manufacture
and market MYOTROPHIN (rhIGF-I) 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 (rhIGF-I) receives regulatory
approval in the United States or certain other countries within the Territory.
The Company has a contractual option to purchase all of the limited partnership
interests in the Partnership (the "Purchase Option").
If the Company is required to make the Milestone Payment and elects to do
so in cash, or if it elects to exercise its contractual option to purchase the
limited partnership interests in the Partnership for cash, as described below
under "Partnership Purchase Option," the Company will be required to make a
substantial cash payment. The Company may consider the purchase of some or all
of the remaining partnership interests other than through exercise of the
Purchase Option. The Company expects that the cost per interest associated with
any such purchase would be substantially greater than the cost incurred in the
1995 purchase of 67 limited partner interests and that, if the Company were to
elect to purchase some or all of the partnership interests in cash, significant
funds could be required.
If the Company does not exercise the Purchase Option or continue funding
the development of MYOTROPHIN (rhIGF-I), its license will terminate and all
rights to manufacture or market MYOTROPHIN (rhIGF-I), in the Territory will
revert to the Partnership, which may 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.
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.
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To satisfy its capital requirements, including its continued funding of
MYOTROPHIN (rhIGF-I) and other programs, 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.
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 $157,967,000 from
inception through December 31, 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 revenues to be
received and costs to be incurred by the Company depend to a large degree on the
results of regulatory actions with respect to the two NDAs recently filed with
the FDA with respect to MYOTROPHIN (rhIGF-I) and PROVIGIL (modafinil) and other
product programs. A majority of the Company's revenues to date have been under
agreements with collaborative partners and the Partnership. 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. 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 has not recognized revenue from this source since 1995.
Therefore, during that period, the Company funded the development of MYOTROPHIN
(rhIGF-I). In addition, if the Company were to make the Milestone Payment,
exercise the Purchase Option or purchase additional interests outside of the
Purchase Option, a material charge to earnings could result, depending upon the
development status of the underlying technology.
The Company and Chiron are currently developing MYOTROPHIN (rhIGF-I) for
the treatment of ALS and certain peripheral neuropathies. The costs of the
program generally are shared equally by the partners. Revenue or expense to be
recognized by the Company under the collaboration with Chiron will depend on the
relative costs incurred by the two companies.
The Company receives funding to support its research and development
activities conducted in collaboration with SmithKline Beecham p.l.c. ("SB")
related to calpain inhibitors, and with TAP, related to the use of certain
compounds in the treatment of cancers, including prostate disease. The funding
levels under these agreements are based on a contract rate for each Cephalon
employee assigned to the program, subject to annual budgetary maximums. The
continuation of the research funding under the agreements with SB and TAP are
subject to the achievement of certain development milestones by the Company and
periodic review by these companies and may be terminated without cause with
prior 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. Should a collaborator elect to
terminate a research program, the Company's ability to recover costs and
expenses proportionately is limited, because a significant portion of the
Company's research expenses, including depreciation and facility costs, are
fixed.
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 Good Manufacturing Practice ("GMP")
regulations. SB is responsible for the manufacture of any products developed
under its arrangement with the Company. Cephalon currently has no manufacturing
facilities of its own for clinical or commercial production of any products
under development.
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Cephalon will need to either construct and operate facilities for these products
or will have to find other manufacturing sources.
The MYOTROPHIN (rhIGF-I) currently being used in ongoing clinical trials
was produced at the Company's pilot-scale manufacturing facility in Beltsville,
Maryland (the "Beltsville Facility"). In November 1996, Cephalon sold the
Beltsville Facility. Chiron has completed a U.S. manufacturing facility (the
"Chiron Facility") to produce recombinant proteins at which the collaboration is
producing MYOTROPHIN (rhIGF-I). 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 use in Japan, as
well as for use in the Company's 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, which was manufactured at the Beltsville Facility. Although,
based on the results of a bioequivalency study, the companies believe that the
material is equivalent, if regulatory authorities do not agree with that
assessment, regulatory approval of MYOTROPHIN (rhIGF-I) could be delayed.
The manufacturing facilities and operations of the Company and 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, both
before and after NDA approval, to determine compliance with those requirements.
The GMP regulations are complex, and failure to be in compliance could lead to
the need for remedial action, penalties and delays in production of material
acceptable to the FDA. The Company has only limited experience in manufacturing
activities. There can be no assurance that the facilities for MYOTROPHIN
(rhIGF-I) have complied and will continue to comply with applicable
requirements. Should the Chiron 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 Cephalon or the
collaboration would be able to locate an alternative, cost-effective source of
supply of MYOTROPHIN (rhIGF-I).
If Chiron ceases its participation in the collaboration, Cephalon, under
certain circumstances, would have the right to purchase supplies of these
products 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, damage the commercial prospects for MYOTROPHIN (rhIGF-I) 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 the collaboration'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 either Lafon or Kyowa Hakko were unable to supply the
Company with the applicable compound, Cephalon is permitted to make such
compound itself or to purchase it from third parties. There can be no assurance
that Cephalon would be able to manufacture any such compound, that a third-party
manufacturer could be located or that either alternative would 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
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compounds for use in clinical trials using chemical intermediates supplied by
Kyowa Hakko. 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, and in a cost effective manner.
Should such a manufacturer be unable to supply 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 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(R) and Serzone(R), 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
arrangements. 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 focusing on neurology in certain countries in Europe.
The Company's agreement with Lafon requires the Company to commence sales and
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marketing activities within three months after receiving approval to market
PROVIGIL (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. 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.
PATENTS AND PROPRIETARY TECHNOLOGIES
An important part of the Company's product development strategy is to seek,
when appropriate, protection for its product candidates and proprietary
technology through the use of various U.S. and foreign patents, trademarks and
contractual arrangements. 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. Cephalon has filed patent applications in
the United States, Canada, Europe and Japan covering the use of IGF-I in certain
peripheral neuropathies and other neurological disorders. The issued patents and
all patent applications relating to IGF-I in the United States, Canada and
Europe have been licensed to the Partnership.
There can be no assurance that any of the Company'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 patents will withstand
challenge. Even in those jurisdictions where rhIGF-I is or may be covered by the
claims of a use patent, "off-label" sales by a third party 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, Chiron has the primary responsibility
for manufacturing commercial supplies of MYOTROPHIN (rhIGF-I). 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 current process for manufacturing rhIGF-I, was the
subject of another interference proceeding. Chiron prevailed in the interference
proceeding and thereafter prevailed in a district court appeal brought by the
other party. That decision has been appealed to the Court of Appeals for the
Federal Circuit by the other party. 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,
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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.
Even if patents issue on the pending applications owned or licensed by the
Company, there can be no assurance that applications filed by others will not
result in patents that would be infringed by the manufacture, use or sale of
MYOTROPHIN (rhIGF-I). The Company is aware of a published application filed
under the Paris Convention Treaty, designating the United States, that relates
to the use of IGF-I 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. Clark &
Elbing LLP, 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. Clark & Elbing LLP has advised the Company
that, in its opinion, no interference should be declared between such
third-party patent application and the Company's patent, but there can be no
assurance that the USPTO will agree with that opinion. 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.
PROVIGIL (modafinil), which the Company has exclusively licensed from Lafon
for the United States, Mexico, the United Kingdom, the Republic of Ireland and
Japanese markets, 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 may also seek an
extension of the patent under the Drug Price Competition and Patent Term
Restoration Act of 1984 (the "DPC Act") equal to one-half the period of time
elapsed between the filing of an IND for PROVIGIL (modafinil) and the filing of
the corresponding NDA, plus the period of time between the filing of the NDA for
PROVIGIL (modafinil) and FDA approval. However, to obtain the full length of any
such extension, the Company must receive FDA approval of PROVIGIL (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 the DPC Act.
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
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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 Territory in return for
certain royalty payments and 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.
The Company has a contractual option to purchase all of the limited
partnership interests in the Partnership. In order to exercise the Purchase
Option, Cephalon is required to make an advance payment of $40,275,000 in cash
or, at Cephalon's election, $42,369,000 in shares of Common Stock, valued at the
market price at the time the Purchase Option is exercised. The Purchase Option
will become exercisable for a 45-day period commencing on the date which is the
earlier of (a) the date which is the later of (i) the last day of the first
month in which the Partnership shall have received Interim License payments
equal to fifteen percent (15%) of the limited partners' capital contributions
(excluding the Milestone Payment), and (ii) the last day of the 24th full month
after the date of the Company's first commercial sale, if any, of Myotrophin
within the Territory that generates a payment to the Partnership, and (b) the
last day of the 48th full month after the date of such first commercial sale, if
any, in the Territory. 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. If the Company were to make the Milestone Payment, exercise the
Purchase Option, or purchase additional interests outside of the Purchase
Option, a material charge to earnings could result, depending upon the
development status of the underlying technology.
If the Company does not exercise the Purchase Option, its license will
terminate and all rights to manufacture or market MYOTROPHIN (rhIGF-I) in the
Territory will revert to the Partnership, which may 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
disorders 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
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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 and is being marketed by Rhone-Poulenc Rorer 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).
Other companies are developing rhIGF-I as a therapeutic product for
disorders other than ALS or peripheral neuropathy, including Genentech, Inc.
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, all of which are available
generically and have been available for a number of years. There can be no
assurance that PROVIGIL (modafinil) possesses benefits over such other products,
or that the Company will be able to demonstrate the value of any such benefits
to prescribing physicians and their patients.
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 modafinil in various
jurisdictions. The marketing activities of the other licensees therefore may
adversely affect the Company's marketing of PROVIGIL (modafinil) in its
territories.
Cephalon is marketing two proprietary products of BMS to neurologists in
the United States: Stadol NS, indicated for the management of pain, including
migraine pain; and Serzone, indicated for the treatment of depression. A number
of therapeutic agents are currently approved and are being marketed both for the
treatment of migraine and for the treatment of depression. Stadol NS also
competes directly with other pain medications, including narcotics, and
indirectly with medications approved explicitly for treatment of migraine. The
Company also believes that other products to treat migraine with a nasal spray
delivery system may be introduced into the U.S. market in 1997 and may compete
directly with Stadol NS.
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.
LITIGATION
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 have been consolidated. Several of the
plaintiffs have been designated by the Court, collectively, as the "lead
plaintiff" for purposes of the Private Securities Litigation Reform Act of 1995.
The consolidated complaint, filed in October 1996 by the lead plaintiffs,
extended and expanded the class period to include purchasers of the Company's
securities as well as options to purchase or sell those securities during the
period between June 12, 1995 and June 7, 1996. Plaintiffs allege, based in part
on statements and opinions expressed at the June 7, 1996 meeting of the Advisory
Committee, that earlier statements by the Company about the North American and
European trial results were misleading. The plaintiffs seek unspecified damages
and other relief. The Company's motion to
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dismiss the case is pending, and discovery related to the merits of the
allegations in the complaint has been postponed until the motion is decided. The
Company intends to vigorously defend the action. However, management believes
that it is too early in the proceedings to predict the outcome of this action
with any certainty.
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 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.
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EFFECT OF EXERCISE OF OPTIONS AND WARRANTS
The Company grants stock options to employees, directors and consultants.
As of December 31, 1996, the Company had 3,181,020 outstanding options at
exercise prices ranging from $0.15 to $31.00 per share. In addition, at December
31, 1996 warrants to purchase 2,898,104 shares of Common Stock were outstanding
at exercise prices ranging from $11.32 to $18.50 per share. Options and warrants
granted represent approximately 25% of the shares of Common Stock currently
outstanding. 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.
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.
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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 Diaz & Altschul Capital, LLC (formerly Owen, Diaz & Altschul
Securities LLC) as placement agent. Pursuant to the terms of the Note Purchase
Agreements, the purchasers of the Notes are obligated to purchase the Notes and
there are no conditions regarding the purchase of the Notes or the terms thereof
which may be controlled by such purchasers. 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.
17
<PAGE> 19
<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 --%
Delta Opportunity Fund, Ltd. ............... 912,000 912,000(1) 0 --%
Stockwell Corporation, S.A. ................ 240,000 240,000(1) 0 --%
Diaz & Altschul Capital, LLC................ 55,314 55,314(2)(3) 0 --%
Mr. Ted B. Owen............................. 15,439 15,439(2) 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) Diaz & Altschul Advisors, LLC, a New York limited liability company ("D&A
Advisors"), serves as advisor to Delta Opportunity Fund, Ltd. ("DO 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. D&A
Advisors is under common control with Diaz & Capital Securities, LLC ("D&A
Capital"). The amounts shown for D&A Capital exclude the amounts shown for
DO 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
18
<PAGE> 20
Act, disclosing (a) the name of each such broker-dealer, agent or underwriter,
(b) the number of shares 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.
19
<PAGE> 21
======================================================
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....................... 16
Selling Stockholders.................. 17
Plan of Distribution.................. 18
Legal Opinion......................... 19
Experts............................... 19
</TABLE>
======================================================
======================================================
1,524,000 SHARES
CEPHALON, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
APRIL , 1997
======================================================
<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.
23.3* -- Consent of Clark & Elbing LLP.
24.1* -- Powers of Attorney (included on the signature page).
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K dated
January 16, 1997 and incorporated herein by reference.
II-1
<PAGE> 23
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 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:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided however, that paragraph (1)(i) and (1(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the 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 2nd day of April, 1997.
CEPHALON, INC.
By: /s/ BRUCE A. PEACOCK
------------------------------------
Bruce A. Peacock
Director, Executive Vice President
and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed by the following persons and
by Bruce A. Peacock as attorney-in-fact for the specified persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- ------------------
<C> <S> <C>
* Director, President and Chief April 2, 1997
- ------------------------------------------ Executive Officer (Principal
Frank Baldino, Jr., Ph.D. Executive Officer)
/s/ BRUCE A. PEACOCK Director, Executive Vice April 2, 1997
- ------------------------------------------ President and Chief Operating
Bruce A. Peacock Officer
* Director April 2, 1997
- ------------------------------------------
William P. Egan
* Director April 2, 1997
- ------------------------------------------
Robert J. Feeney, Ph.D.
* Director April 2, 1997
- ------------------------------------------
Martyn D. Greenacre
* Director April 2, 1997
- ------------------------------------------
Kevin E. Moley
* Director April 2, 1997
- ------------------------------------------
Horst Witzel, Dr.-Ing.
* Senior Vice President, Finance April 2, 1997
- ------------------------------------------ and Chief Financial Officer
J. Kevin Buchi (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ BRUCE A. PEACOCK
------------------------------
Bruce A. Peacock
Attorney-in-Fact
<PAGE> 25
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.
23.3* -- Consent of Clark & Elbing LLP.
24.1* -- Powers of Attorney (included on the signature page).
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
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 March 3, 1997
included in Cephalon, Inc.'s Form 10-K/A-2 for the year ended December 31, 1996
and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
April 2, 1997
