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As filed with the Securities and Exchange Commission on March 30, 1999
Registration No.333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
________________
CEPHALON, INC.
(Exact name of registrant as specified in its charter)
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Delaware 2834 23-2484489
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification No.)
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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)
_____________
JOHN OSBORN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
CEPHALON, INC.
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 of all communications to:
DAVID R. KING, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET
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. [_]
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CALCULATION OF REGISTRATION FEE
================================================================================================================================
Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered registered price per share aggregate offering registration fee
price
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Common Stock, 1,945,000 $ 10.08(1) $ 19,605,600(1) $5,450.36(1)
$.01 par value
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(1) Warrants to purchase 1,945,000 shares of Common Stock are exercisable at
$10.08 per share through March 1, 2004. All warrants are subject to certain
adjustments.
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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The information in this prospectus is not complete and may change. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 30, 1999
(PROSPECTUS)
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1,945,000 SHARES
CEPHALON, INC.
COMMON STOCK
This Prospectus relates to the resale, pursuant to the plan of distribution
described in this Prospectus, of the following shares (the "Shares") of common
stock of Cephalon, Inc.
. Up to 1,920,000 shares (the "Warrant Shares") of common
stock issuable upon exercise of our Class A Warrants and Class B
Warrants (the Class A Warrants and the Class B Warrants are referred
to as the "Warrants" in this Prospectus) that were issued to
purchasers (the "Selling Stockholders") of our 11% Revenue Sharing
Senior Secured Notes due 2002 (the "Notes").
. Up to 25,000 shares (the "Additional Warrant Shares") of common stock
issuable upon exercise of warrants (the "Additional Warrants"), having
the same terms as the Class A Warrants, that were issued to Petkevich
& Partners ("P+P") as compensation for providing financial advice to
the Company.
We are responsible for all expenses of registering the Shares.
The Selling Stockholders are responsible for all selling and other expenses
they incur in connection with the resale of the Warrant Shares. P+P is
responsible for all selling and other expenses it incurs in connection with the
resale of the Additional Warrant Shares. We will not receive any proceeds from
(i) the resale of the Warrant Shares by the Selling Stockholders or (ii) the
resale of the Additional Warrant Shares by P+P. See "Selling Stockholders" on
page 15 and "Plan of Distribution for the Resale of the Shares" on page 16. The
Selling Stockholders have not advised us of any specific plans for the
distribution of the Warrant Shares that they may sell. P+P has not advised us of
any specific plans for the distribution of the Additional Warrant Shares.
However, we anticipate that the Selling Stockholders will sell any Warrant
Shares issued to them, and P+P will sell any Additional Warrant Shares issued to
it, from time to time primarily in transactions, which may include block
transactions, on the Nasdaq National Market at the market price on the date of
sale.
Our common stock is quoted on the Nasdaq National Market under the symbol
"CEPH." On March 26, 1999 the last reported closing price of our common stock
was $9.88 per share.
INVESTING IN THE SHARES INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________________________
THE DATE OF THIS PROSPECTUS IS MARCH __, 1999
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TABLE OF CONTENTS
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Page
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About this Prospectus....................................................................................... 2
Where You Can Find More Information......................................................................... 2
Forward-Looking Statements.................................................................................. 3
Our Company................................................................................................. 4
Risk Factors................................................................................................ 6
Use of Proceeds............................................................................................. 14
Exercise of the Warrants.................................................................................... 14
Selling Stockholders........................................................................................ 15
Plan of Distribution for the Resale of the Shares........................................................... 16
Legal Opinion............................................................................................... 17
Experts..................................................................................................... 17
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ABOUT THIS PROSPECTUS
You should only rely on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. The information contained in this Prospectus is
accurate only as of the date of this Prospectus, regardless of the time of
delivery of this Prospectus or of any sale of common stock.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any reports, statements or other information we file at the SEC's
public reference rooms located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661 and 7 World Trade Center, Suite 1300, New York, NY 10048.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
We have filed a Registration Statement on Form S-3, of which this
Prospectus forms a part, to register the resale of the Shares with the SEC. As
allowed by SEC rules, this Prospectus does not contain all the information you
can find in the Registration Statement or the exhibits to the Registration
Statement.
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Prospectus, except for
any information superseded by information in this Prospectus. This Prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about us, our
business and our finances.
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The documents that we are incorporating by reference are:
. Our Annual Report on Form 10-K for the year ended December 31, 1998;
. Our Current Report on Form 8-K filed with the SEC on March 1, 1999;
and
. The description of our common stock that is contained in our Form 8-A
Registration Statement filed with the SEC on March 15, 1991, including
any amendments or reports filed for the purpose of updating such
description.
Any documents which we file pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus but before the end of any
offering of securities made under this Prospectus will also be considered to be
incorporated by reference.
If you request, either orally or in writing, we will provide you with a
copy of any or all documents which are incorporated by reference. We will
provide such documents to you free of charge, but will not include any exhibits,
unless those exhibits are incorporated by reference into the document. You
should address written requests for documents to John Osborn, Senior Vice
President and General Counsel, Cephalon, Inc., 145 Brandywine Parkway, West
Chester, PA 19380, (610) 344-0200.
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Prospectus contains some forward-
looking statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. Such statements may
include words such as "anticipate", "estimate", "expect", "project", "intend",
"plan", "believe" and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. In particular,
these include statements relating to present or anticipated scientific progress,
development of potential pharmaceutical products, future revenues, capital
expenditures, research and development expenditures, future financing and
collaborations, personnel, manufacturing requirements and capabilities, and
other statements regarding matters that are not historical facts or statements
of current condition.
Any or all of our forward-looking statements in this Prospectus may
turn out to be wrong. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Many factors mentioned in
the discussion below will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our 10-Q, 8-K and 10-K reports to the SEC. Also note that we provide
the following cautionary discussion of risks and uncertainties relevant to our
business. These are factors that we think could cause our actual results to
differ materially from expected results. Other factors besides those listed here
could also adversely affect us. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
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OUR COMPANY
Cephalon, Inc., headquartered in West Chester, PA, is an international
biopharmaceutical company dedicated to the discovery, development and marketing
of products to treat neurological disorders and cancer.
In December 1998, we received approval from the U.S. Food and Drug
Administration ("FDA") to market PROVIGIL(R) (modafinil) Tablets [C-IV]
("PROVIGIL Tablets" or "PROVIGIL"), our first approved product in the United
States. PROVIGIL has been approved for treating excessive daytime sleepiness
associated with narcolepsy. Sales of PROVIGIL were initiated in the U.S. in
February 1999 by our U.S. sales organization. We began marketing PROVIGIL in the
United Kingdom in March 1998 and the Republic of Ireland in February 1999
through our United Kingdom-based sales organization. Additionally, we have
rights to commercialize PROVIGIL in Austria, Italy, Mexico and Switzerland, and
applications seeking marketing approval have been filed or are being prepared in
these countries. We also have rights to PROVIGIL in Japan. We are highly
dependent on the commercial success of PROVIGIL in the United States. See "Risk
Factors."
In February 1997, the Company and Chiron Corporation ("Chiron") submitted a
new drug application ("NDA") to the FDA for approval to market MYOTROPHIN(R)
(mecasermin) Injection ("MYOTROPHIN Injection" or "MYOTROPHIN") in the United
States for the treatment of amyotrophic lateral sclerosis ("ALS"). In May 1998,
the FDA issued a letter stating that the new drug application was "potentially
approvable," under certain conditions. We cannot predict whether these
conditions can be met to the satisfaction of the FDA, and the prospects for
regulatory approval of MYOTROPHIN continue to be very uncertain in the United
States. Because they believed the application would not be approved, in
September 1998, Cephalon and Chiron withdrew their joint marketing authorization
application for MYOTROPHIN in Europe for the treatment of ALS.
We have initiated clinical studies exploring the utility of PROVIGIL in
treating excessive daytime sleepiness and fatigue associated with disorders
other than narcolepsy, such as sleep apnea and multiple sclerosis. We have a
significant discovery research program that focuses on discovering and
developing treatments for neurological disorders such as Parkinson's disease,
Alzheimer's disease and stroke, and oncological disorders such as prostate
cancer, pancreatic cancer and a variety of other cancers. Cephalon and TAP
Holdings Inc. ("TAP") have formed an alliance for the development of signal
transduction modulators for the treatment of cancers and prostate disorders in
the United States. TAP is conducting Phase I clinical studies of intravenously
and orally administered compounds.
Our research and development efforts focus primarily in two areas:
neurodegenerative disorders and oncological disorders. Neurodegenerative
disorders are characterized by the death of neurons, the specialized conducting
cells of the nervous system. Oncological disorders are characterized by the
uncontrolled proliferation of cells that form tumors. We utilize our technical
expertise in molecular biology, molecular pharmacology, biochemistry, cell
biology, tumor biology and chemistry to develop products in both
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of these areas. Our research strategy has focused on understanding the cellular
mechanisms of cell survival and cell death. This understanding may allow
medicinal chemical approaches toward creating novel, small, orally active,
synthetic molecules which would facilitate the death of tumor cells leading to
new therapies in oncology or would cross the blood-brain barrier (which prevents
the free passage of many molecules between the bloodstream and the central
nervous system) and enhance the survival of neurons, thereby intervening in the
progression of neurodegenerative disorders. We believe that our
multidisciplinary technology approach facilitates the development of a portfolio
of potential products for the treatment of neurological disorders which involve
neuronal death such as Parkinson's disease, Alzheimer's disease and stroke, and
oncological disorders such as prostate cancer, pancreatic cancer and a variety
of other cancers. Our research programs currently consist of four core
technology areas: neurotrophic factors, gene transcription regulators, signal
transduction modulators and protease inhibitors.
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RISK FACTORS
You should carefully consider the following risk factors and the other
information presented in this Prospectus before deciding to invest in the Shares
of common stock covered by this Prospectus.
DEPENDENCE ON THE COMMERCIAL SUCCESS OF PROVIGIL(R) (MODAFINIL) TABLETS [C-IV]
During the next several years we will be very dependent on the commercial
success of PROVIGIL(R) (modafinil) Tablets [C-IV] ("PROVIGIL Tablets" or
"PROVIGIL"), especially in the United States. In December 1998, the FDA approved
PROVIGIL for use by those suffering from excessive daytime sleepiness associated
with narcolepsy. The market for use of PROVIGIL in narcolepsy patients is
relatively small; it is limited to approximately 125,000 persons in the United
States, of which we estimate between 30,000 and 45,000 currently are seeking
treatment from a physician. At our present level of operations, we will not be
able to attain profitability if physicians prescribe PROVIGIL only for those who
are diagnosed narcoleptics and, we may not promote PROVIGIL outside of this
approved use. We have initiated clinical studies to examine whether or not
PROVIGIL is effective and safe when used in connection with disorders other than
narcolepsy, but we do not know whether these studies will in fact demonstrate
safety and efficacy, or if they do, whether we will succeed in receiving
regulatory approval to market PROVIGIL for additional disorders. If the results
of these studies are negative, or if adverse experiences are reported in these
clinical studies or otherwise in connection with the use of PROVIGIL by
patients, this could undermine physician and patient comfort with the product
and limit the commercial success of the product. Even if the results of these
studies are positive, the impact on PROVIGIL may be negligible until we are able
to obtain FDA approval to expand the authorized use of PROVIGIL to include
treatment for conditions other than excessive daytime sleepiness associated with
narcolepsy. FDA regulations restrict our ability to communicate the results of
additional clinical studies to patients and physicians without first obtaining
from the FDA approval to expand the authorized uses for this product. As a
result, it may be several years, if ever, before we have sales revenue from
PROVIGIL beyond that attributable to prescriptions for diagnosed narcoleptics.
In addition, the following factors could limit the rate and level of market
acceptance of PROVIGIL:
. the effectiveness of our sales and marketing efforts relative to those of
our competitors;
. the availability and level of reimbursement for PROVIGIL by third-party
payors, including Federal, state and foreign government agencies;
. the occurrence of any side effects or adverse reactions (or unfavorable
publicity relating thereto) stemming from the use of PROVIGIL.
We have described these and other factors in more detail below:
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Effectiveness of our marketing and selling efforts
We must effectively market and sell PROVIGIL in the United States. In the
United States and elsewhere, PROVIGIL faces significant competition in the
marketplace since narcolepsy is currently treated with several drugs, all of
which have been available for a number of years and many of which are available
in inexpensive generic forms. Thus, we will need to demonstrate to physicians
and third party payors that the cost of PROVIGIL is reasonable and appropriate
in light of the safety and efficacy of the product, and the related health care
benefits to the patient.
During the past few years, we have developed a specialty sales organization
focused on marketing, promoting and detailing the products of other companies to
neurologists. However, we have no experience in marketing, selling or
distributing our own products in the United States, and we lack the more
substantial experience held by major pharmaceutical companies in developing,
training and managing a sales organization over an extended period of time. More
recently, we have established a managed care sales force to market our products
to health maintenance organizations, prescription benefit management firms, and
other third party payors; we also lack substantial experience in this area and
we cannot be certain that we will be successful in our efforts to market our
products to these groups.
Uncertainty associated with third party payor reimbursement levels
The continuing efforts of government and third party payors to contain or
reduce the costs of health care through various means may affect our sales. In
certain foreign markets, pricing or profitability of pharmaceutical products is
subject to governmental control. In the United States, there have been, and we
expect there will continue to be, various Federal and state proposals to
implement similar government controls. The adoption by Federal or state
governments of any such proposals could limit the commercial success of
PROVIGIL. In addition, in both the United States and elsewhere, sales of
pharmaceutical products are dependent in part on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. Third party payors are increasingly challenging the
prices charged for products, and are limiting reimbursement levels offered to
consumers for such products. To the extent that third party payors direct such
efforts toward PROVIGIL, the commercial success of the product could be
impaired.
Uncertainty as to the occurrence of unexpected adverse events
The usage of PROVIGIL has been limited to date to clinical trial patients
under controlled conditions and under the care of expert physicians. We cannot
predict whether the commercial use of PROVIGIL will produce undesirable or
unintended side effects that have not been demonstrated in our clinical trials.
No assurance of market exclusivity for PROVIGIL
We hold exclusive license rights to a composition-of-matter patent covering
modafinil as the active drug substance in PROVIGIL; this patent was to have
expired in 1998 in the United States but we have applied for a patent extension
that, if granted, would run through November 18, 2001. In addition, we own a
U.S. patent covering the particle size of modafinil which issued in 1997.
However, we may
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not succeed in obtaining any extension for the composition-of-matter patent and
we cannot guarantee that any of our patents will be found to be valid if their
validity is challenged by a third party, or that these patents (or any other
patent owned or licensed by us) would prevent a potential competitor from
developing competing products or product formulations that avoid infringement.
The FDA has granted orphan drug status to PROVIGIL for its use in the
treatment of excessive daytime sleepiness associated with narcolepsy, which
allows us a seven-year period of marketing exclusivity for the product in that
indication. While the marketing exclusivity provided by the orphan drug law
should prevent other sponsors from obtaining approval of the same compound for
the same indication (unless the other sponsor can demonstrate clinical
superiority), it would not prevent approval of the compound for other
indications that otherwise are non-exclusive, nor approval of other kinds of
compounds for the same indication.
Manufacturing and distribution uncertainties associated with PROVIGIL
We depend upon Laboratoire L. Lafon as our sole supplier of bulk modafinil
compound, the active drug substance contained in PROVIGIL. Moreover, we depend
upon a single manufacturer that is qualified to manufacture finished PROVIGIL
for commercial purposes, and a non-active ingredient used in the manufacture of
PROVIGIL is no longer available. We maintain an inventory of modafinil compound
to protect against supply disruptions and, at anticipated levels of demand, we
also have several years supply of the ingredient that is no longer available. We
are preparing a new formulation of PROVIGIL that would not include the now
unavailable ingredient, and could enable us to qualify additional tablet
manufacturers with regulatory authorities. However, the introduction of any such
new formulation requires that we establish that the new formulation is
bioequivalent to the current one, and also requires regulatory approval. If we
are unable to develop and obtain approval for a new formulation, or if demand
for the product were to greatly exceed expectations, we could face supply
disruptions that would result in significant costs and delays, undermine
goodwill established with physicians and patients, and damage commercial
prospects for PROVIGIL.
We must comply with all applicable regulatory requirements of the FDA and
foreign authorities, including current Good Manufacturing Practice regulations
("cGMP"). The facilities used to manufacture, store and distribute our products
are subject to inspection by the FDA and other regulatory authorities at any
time to determine compliance with cGMP and other regulatory requirements. The
cGMP regulations are complex, and failure to be in compliance could lead to
remedial action, civil and criminal penalties and delays in production of
material.
We rely on several third parties in the United States to formulate,
tablet, package, distribute, provide customer service activities and accept and
process returns. Although we employ a small number of persons to coordinate and
manage the activities undertaken by these third parties, we have relatively
limited experience in this regard. Any disruption in these activities could
impede our ability to sell PROVIGIL and reduce sales revenue.
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RISK ASSOCIATED WITH REVENUE-SHARING NOTES
In February 1999, we completed the sale of $30,000,000 of the Notes. The
Notes are secured by our licenses, patents and FDA rights relating to PROVIGIL
(collectively, the "Pledged Assets"). The Notes contain a number of covenants
including a requirement to maintain cash and cash equivalent balances of
$40,000,000 through December 31, 1999 and $30,000,000 during the remainder of
the term of the Notes. If we fail to maintain such cash balances, the holders of
the Notes can declare a default and increase the royalty percentage to 25% of
U.S. PROVIGIL sales and, if the default is not cured within one year, can
accelerate the due date of the Notes and foreclose on the Pledged Assets. The
holders of the Notes can also foreclose on the Pledged Assets if we fail to pay
principal and interest when due or violate certain other covenants.
NEED FOR ADDITIONAL FUNDS
Since our inception we have had negative cash flow from operations. As of
December 31, 1998, we had sufficient cash resources to fund our operations at
their current level for at least twelve months. However, beyond 1999, we will
need to raise substantial additional funds to continue our operations at their
current level, continue to meet our minimum cash balance requirements during the
period prior to the repayment of the Notes and pay the Notes at maturity. We
expect that it will be at least several years, if ever, before our level of
commercial sales and other revenue will provide enough funds to generate
positive cash flow from operations. Therefore, if we cannot raise additional
funds, we will have to reduce our present level of spending which may involve
curtailing or restructuring our operations, including the sale of certain assets
of the company. Even after taking these steps, we would not be able to eliminate
all of our existing fixed costs, such as occupancy expenses and debt service.
Most of the funds we have raised to date have been through the sale of
equity in the company; our ability to raise money through the sale of additional
equity in the company, as well as the price at which such equity may be sold,
are difficult to predict. If we issue common stock or securities convertible
into common stock in order to raise such funds, the existing shareholders'
percentage ownership of Cephalon necessarily would be reduced.
VOLATILITY OF STOCK PRICE
The market price and trading volume of shares of our common stock is
volatile, and we expect it to continue to be volatile for the foreseeable
future. Negative announcements (such as adverse regulatory decisions, disputes
concerning patent or other proprietary rights, or operating results that fall
below the market's expectations) could trigger significant declines in the price
of our common stock. In addition, news concerning certain external events, such
as that concerning our competitors or changes in government regulations that may
impact the biotechnology or pharmaceutical industries, also could affect the
price of our common stock.
POTENTIAL FOR PRODUCT LIABILITY
The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims even if our drugs or a
collaborator's drugs are not actually at fault for causing an injury.
Furthermore, our products may cause, or may appear to have caused, adverse side
effects or potentially dangerous drug
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interactions that we may not learn about or understand fully until the drug is
actually manufactured and sold for some time. Product liability claims can be
expensive to defend and may result in large judgments or settlements against us,
which could have a negative effect on our financial performance. We maintain
product liability insurance at a relatively limited level, and as such, claims
could exceed our coverage. Furthermore, we cannot be certain that we will always
be able to purchase sufficient insurance at an affordable price. Even if a
product liability claim is not successful, the adverse publicity and time and
expense of defending such a claim may interfere with our business.
LEGAL PROCEEDINGS
Cephalon, a current director and officer, and a former officer, have been
named as defendants in a number of civil actions filed in the U.S. District
Court for the Eastern District of Pennsylvania, all of which have been
consolidated into a single class action. The plaintiff class is comprised of
those persons and entities who purchased Cephalon common stock, or traded in
options to buy or sell Cephalon common stock, during the period June 12, 1995
through and including June 7, 1996. Plaintiffs seek to hold defendants liable
for stock trading losses that stem from alleged violations of the U.S.
securities laws and alleged common law negligent misrepresentation. More
specifically, plaintiffs have alleged that statements made by Cephalon and the
named defendants relating to the results of certain clinical studies of
MYOTROPHIN were misleading. A judgment in this matter could materially exceed
the coverage that may be available under our directors' and officers' liability
insurance. We are vigorously defending this lawsuit and believe that there are
valid defenses against the claims, but the defense of the action is expensive,
and the costs of defense will reduce the amount of insurance coverage that might
otherwise be available to satisfy the claims. In an effort to resolve this
dispute, in January 1999, we engaged a mediator to initiate a non-binding
mediation process and commenced discussions with counsels for the lead
plaintiffs. However, at this time we are not able to determine with any
certainty the results of these discussions, the outcome of this action or our
potential liability.
Due to our involvement in promoting STADOL NS(R) (butorphanol tartrate)
Nasal Spray, a product of Bristol-Myers Squibb ("BMS"), we are a co-defendant in
a product liability action brought against BMS. Although we cannot predict with
certainty the outcome of this litigation, we believe that any expenses or
damages that we may incur will be paid by BMS under the indemnification
provisions of our co-promotion agreement. As such, we do not believe that these
actions will have a negative effect on our financial condition or results of
operations.
RISKS INHERENT IN RESEARCH AND DEVELOPMENT OF PHARMACEUTICAL PRODUCTS
We are highly focused on the research and development of potential
pharmaceutical products. Research and development of potential pharmaceutical
products is a very risky and speculative activity that is extremely time
consuming and expensive. These activities include engaging in discovery research
and process development, conducting preclinical and clinical studies, and
seeking regulatory approval in the United States and abroad. In all of these
areas, we have relatively limited resources and compete against major
multinational pharmaceutical companies. Moreover, even if we undertake these
activities in an effective and efficient manner, regulatory approval
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for the sale of new pharmaceutical products remains unlikely since, in our
industry, the majority of compounds fail to enter clinical studies and the
majority of therapeutic candidates entering clinical studies fail to be
commercialized.
UNCERTAIN ABILITY TO PROTECT PATENTS AND OTHER PROPRIETARY TECHNOLOGY AND
INFORMATION
Our ability to compete effectively depends, in part, on our ability to
protect our proprietary technology, both in the United States and abroad. As
such, we place considerable importance on obtaining patent and trade secret
protection for new technologies, products and processes.
We intend to file applications for patents covering the composition of
matter or uses of our drug candidates or our proprietary processes. We also rely
on trade secrets, know-how and continuing technological advancements to support
our competitive position. Although we have entered into confidentiality and
invention rights agreements with our employees, consultants, advisors and
collaborators, we cannot be sure that such agreements will be honored or that we
will be able to effectively protect our rights to our unpatented trade secrets
and know-how. Moreover, we cannot be sure that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets and know-how. In addition, many of
our scientific and management personnel have been recruited from other
biotechnology and pharmaceutical companies where they were conducting research
in areas similar to those that we now pursue. As a result, we could be subject
to allegations of trade secret violations and similar claims.
In addition, we could incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those licensed
to us by third parties, and in defending suits against us or our employees
relating to ownership of or rights to intellectual property. Such disputes could
substantially delay our drug development or commercialization. The U.S. Patent
and Trademark Office ("PTO") or a private party could institute an interference
proceeding involving us in connection with one or more of our patents or patent
applications. Such proceedings could result in an adverse decision as to
priority of invention, in which case we would not be entitled to a patent on the
invention at issue in the interference proceeding. The PTO or a private party
could also institute reexamination proceedings involving us in connection with
one or more of our patents, and such proceedings could result in an adverse
decision as to the validity or scope of the patents.
DEPENDENCE ON KEY EXECUTIVES AND SCIENTISTS
The nature of our business is such that we are highly dependent upon our
ability to attract and retain qualified scientific, technical and managerial
personnel. There is intense competition for qualified personnel in the
pharmaceutical and biotechnology industries, and we cannot be sure that we will
be able to continue to attract and retain qualified personnel necessary for the
development and management of our business. Our research and development
programs and our business might be harmed by the loss of the services of
existing personnel, as well as the failure to recruit additional key scientific,
technical and managerial personnel in a timely manner. Much of the know-how we
have developed resides in our scientific and technical personnel and is
-11-
<PAGE>
not readily transferable to other personnel. We do not maintain "key man" life
insurance on any of our employees.
UNCERTAINTIES RELATED TO MYOTROPHIN(R) (MECASERMIN) INJECTION
Cephalon and Chiron have withdrawn the joint marketing authorization
application for MYOTROPHIN in Europe for the treatment of ALS. We made this
decision because of comments we received from the reviewer of the application
concerning the results of our two pivotal ALS studies. These comments led us to
believe that our application would not be approved. The withdrawal of our
marketing authorization application for MYOTROPHIN in Europe may negatively
affect the FDA approval process for MYOTROPHIN in the United States.
In May 1998, the FDA issued a letter stating that the NDA application
submitted jointly by Cephalon and Chiron to market MYOTROPHIN in the United
States for the treatment of ALS was "potentially approvable," contingent,
however, upon the submission of additional information from ongoing clinical
studies that demonstrates to the satisfaction of the FDA that MYOTROPHIN is
effective in the treatment of ALS. Cephalon and Chiron have had discussions with
the FDA regarding safety and efficacy data and have submitted information from
the ongoing treatment investigational new drug program ("T-IND"). The T-IND is a
compassionate use program that is neither placebo-controlled nor blinded, and
therefore is not designed to produce evidence of efficacy. No additional data
will be submitted to the FDA at this time. The study of MYOTROPHIN in ALS
patients being conducted by Kyowa Hakko in Japan is not under our control.
Results from that study may be available in late 1999 but may not satisfy the
FDA's request for additional information. The prospects for regulatory approval
of MYOTROPHIN continue to be very uncertain in the United States. We will
continue to evaluate the prospects of receiving regulatory approval and, based
on communications with the FDA, may determine to withdraw the new drug
application.
If the information that has been submitted to the FDA to date does not
prove to be sufficient for approval, a new study would be necessary, which would
be expensive and would take years to complete. We are not sure whether the
potential profits from sales of MYOTROPHIN would make an additional study
cost-effective to conduct. Even if an additional study were conducted, the
results of a new study may not be sufficient to obtain regulatory approval.
DEPENDENCE ON CORPORATE COLLABORATORS
Because we have limited resources, we have entered into a number of
agreements with other pharmaceutical companies to support our efforts to develop
and market potential products. These agreements may call for our partner to
control:
. the supply of bulk or formulated drugs for commercial use or for use in
clinical trials;
. the design and execution of clinical studies;
. the process of obtaining regulatory approval to market the product; and
. the marketing and selling of any approved product.
In each of these areas, our research and commercial interests may not be
supported fully since our program may well compete for time, attention and
resources with the internal programs of our corporate collaborators. As such, we
cannot be sure
-12-
<PAGE>
that our corporate collaborators will share our perspectives on the relative
importance of our program, that they will commit sufficient resources to our
program to move it forward effectively, or that the program will advance as
rapidly as it might if we had retained complete control of all research,
development, regulatory and commercialization decisions. For example, we rely on
several of these collaborators for the production of compounds and the
manufacture and supply of pharmaceutical products. If we learn from any of them
that they will not, or cannot, continue to produce and supply compounds or
products under the terms of our agreement(s), we would attempt to identify and
obtain a commitment from another manufacturer. We cannot be certain that we
would be able to locate an appropriate manufacturer or that a new manufacturer
will be able to manufacture such compounds or products in sufficient quantities,
at reasonable prices, and in accordance with cGMP requirements established by
the FDA and other regulatory authorities.
OTHER RISKS
We face other risks and uncertainties in our business that are
characteristic of a company operating in the biotechnology and pharmaceutical
industries, including intense competition and the failure to keep pace with
rapid technological developments; environmental risks associated with the
materials used in research and development activities; and the failure of
third-party vendors and suppliers to be Year 2000 compliant in a timely manner.
-13-
<PAGE>
USE OF PROCEEDS
We will use the proceeds, if any, from the exercise of the Warrants and the
Additional Warrants to: (i) pay a portion of amounts due under the Notes,
potentially including payment of principal and payment of royalties due upon
sales of PROVIGIL, (ii) support the ongoing development and marketing of
PROVIGIL and (iii) support the Company's other research and development
programs.
We will not receive any proceeds from the resale of the Warrant Shares or
the Additional Warrant Shares.
EXERCISE OF THE WARRANTS
The Warrants permit the holders of the Warrants to purchase up to 1,920,000
Warrant Shares at an exercise price, subject to adjustment, of $10.08 per
Warrant Share (the "Exercise Price").
The Additional Warrants permit P+P to purchase up to 25,000 Additional
Warrant Shares at the Exercise Price.
The number of Warrant Shares and Additional Warrant Shares is subject to
adjustment, on a weighted-average basis, upon the following events: (1) the
subdivision or combination of shares of common stock, (2) the issuance of
dividends in the form of common stock or other securities, (3) the issuance to
all holders of common stock of rights, options or warrants to purchase common
stock for less than the market price at the time of such issuance, (4) the
issuance of dividends in the form of debt securities or other property and (5)
the payment of cash dividends in excess of 10% of the market price of our common
stock at the time. In such events, the Exercise Price per Warrant Share and
Additional Warrant Share is subject to a corresponding adjustment.
The holders of the Warrants will forfeit Class B Warrants to purchase up to
480,000 of the Warrant Shares issuable upon exercise of the Class B Warrants if
specified PROVIGIL sales levels are achieved.
-14-
<PAGE>
SELLING STOCKHOLDERS
In recognition of the fact that holders may wish to be legally permitted to
sell any Warrant Shares they may acquire upon exercise of the Warrants or
Additional Warrant Shares upon exercise of the Additional Warrants when the
holder deems appropriate, we have filed with the SEC 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 Warrant Shares and the Additional Warrant Shares
from time to time on the Nasdaq National Market or in privately-negotiated
transactions or otherwise and we have 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 Warrant Shares and the Additional
Warrant Shares are no longer required to be registered for the resale by the
Selling Stockholders or P+P. See "Plan of Distribution for Resale of the
Shares."
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock by each Selling Stockholder or P+P.
<TABLE>
<CAPTION>
Number of Shares Maximum Number of Beneficial Ownership
Beneficially Owned Shares After Resale of Shares
-----------------------------
Name of as of Being Number of
Selling Stockholder February 23, 1999 Offered Shares Percent
- -------------------------------------- ----------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C>
Delta Opportunity Fund, Ltd. 0 464,000 0 -
Delta Opportunity Fund (Institutional) 0 176,000 0 -
DLJ Capital Group 0 2,837 0 -
DLJ ESC II, L.P. 0 28,589 0 -
The Kaufmann Fund, Inc. 500,000 640,000 0 -
Sprout Capital VIII, L.P. 0 327,323 0 -
Sprout Growth II, L.P. 0 261,611 0 -
Sprout Venture Capital, L.P. 0 19,640 0 -
Petkevich & Partners 500 25,000 0 -
</TABLE>
-15-
<PAGE>
PLAN OF DISTRIBUTION FOR THE RESALE OF THE SHARES
A Selling Stockholder may from time to time, in one or more transactions, sell
all or a portion of the Warrant Shares and P+P may from time to time, in one or
more transactions, sell all or a portion of the Additional Warrant Shares on the
Nasdaq National Market, in negotiated transactions, in underwritten transactions
or otherwise, at prices then prevailing or related to the then current market
price or at negotiated prices. The offering price of the Warrant Shares from
time to time will be determined by a Selling Stockholder and the offering price
of the Additional Warrant Shares from time to time will be determined P+P, and
at the time of such determination, may be higher or lower than the market price
of our common stock on the Nasdaq National Market. The Shares may be sold
directly or through broker-dealers acting as principal or agent, or pursuant to
a distribution by one or more underwriters on a firm commitment or best-efforts
basis. The methods by which the Shares may be sold include: (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-dealer as principal and resale by such
broker-dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) privately negotiated transactions. In effecting sales, brokers or
dealers engaged by a Selling Stockholder or by P+P may arrange for other brokers
or dealers to participate. Such brokers or dealers may receive commissions or
discounts from a Selling Stockholder or P+P as applicable, in amounts to be
negotiated immediately prior to the sale. A Stockholder, P+P and any
underwriters, dealers or agents participating in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act, and
any profit on the sale of the Shares by a Stockholder or P+P and any commissions
received by any such broker-dealers may be deemed to be underwriting commissions
under the Securities Act. In addition, any Shares covered by this Prospectus
that qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather
than pursuant to this Prospectus.
Additionally, in connection with the sale of the Shares, a Selling
Stockholder or P+P may enter into hedging transactions with broker-dealers and
the broker-dealers may engage in short sales of the shares in the course of
hedging the positions they assume with the Selling Stockholder or P+P. A Selling
Stockholder or P+P may also enter into option or other transactions with broker-
dealers that involve the delivery of the Shares to the broker-dealers, who may
then resell or otherwise transfer the Shares. A Selling Stockholder or P+P may
also loan or pledge the Shares to a broker-dealer and the broker-dealer may sell
the Shares so loaned or upon a default may sell or otherwise transfer the
pledged Shares.
When a Selling Stockholder elects to make a particular offer of Warrant
Shares, or P+P elects to make a particular offer of Additional Warrant Shares, a
prospectus supplement, if required, will be distributed that will identify any
underwriters, dealers or agents and any discounts, commissions and other terms
constituting compensation from a Selling Stockholder or P+P, as applicable, and
any other required information.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the Shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
We also have agreed to indemnify the Selling Stockholders or P+P in certain
circumstances, against certain liabilities arising under the Securities Act.
Each Selling Stockholder or P+P has agreed to indemnify us and our directors and
officers who sign the registration statement against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to pay all costs and expenses relating to the registration
of the Shares (other than fees and expenses, if any, of counsel or other
advisors to the Selling Stockholders P+P). 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 or P+P, as applicable, selling such Shares.
All references to Selling Stockholders in this Section shall also be deemed
to include any transfees, assignees and pledgees of the Selling Stockholders.
-16-
<PAGE>
LEGAL OPINION
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of the Shares.
EXPERTS
The financial statements of Cephalon, Inc. as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31, 1998
have been incorporated by reference herein in reliance upon the report of Arthur
Andersen LLP, independent certified public accountants, incorporated by
reference herein, and the authority of said firm as experts in accounting and
auditing.
-17-
<PAGE>
================================================================================
1,945,000 Shares
CEPHALON, INC.
Common Stock
----------
PROSPECTUS
----------
March __, 1999
================================================================================
<PAGE>
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.
Commission fee........................................ $ 5,450.00
Nasdaq listing fee.................................... $ 17,500.00
Legal fees, accounting fees and expenses.............. $300,000.00
Total............................................. $322,950.00
==========
All of the amounts shown are estimates except for the fees payable to the
Securities and Exchange Commission and the National Association of Securities
Dealers.
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
9 of the Company's By-Laws provides for the indemnification of directors,
officers, employees and agents of the Company to the maximum extent permitted by
the Delaware General Corporation Law. Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director, officer or agent of the corporation or another enterprise
if serving at the request of the corporation. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith and in respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In the
case of an action by or in the right of the corporation, no indemnification may
be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
The Company's By-laws permit it to purchase insurance on behalf of such
person against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status a such, whether or not the Company
would have the power to indemnify him against such liability under the foregoing
provision of the By-laws.
<PAGE>
ITEM 16. LIST OF EXHIBITS
The exhibits filed as part of this registration statement are as follows:
EXHIBIT
NUMBER DESCRIPTION
5.1* Opinion of Morgan, Lewis & Bockius LLP regarding legality of
securities being registered.
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 signature page).
___________
* Filed herewith.
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
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Restated Certificates of Incorporation, its By-laws,
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 of 1933 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 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 of 1933 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
Postt-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 (I)(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.
II-2
<PAGE>
(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
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-3
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
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 West Chester, Pennsylvania, on this 29th day of March, 1999.
CEPHALON, INC.
By: /s/ Frank Baldino, Jr, Ph.D.
-------------------------------------------
Frank Baldino, Jr., Ph.D.
President, Chief Executive Officer and Director
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>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
By: /s/ Frank Baldino, Jr., Ph.D. President, Chief Executive Officer and March 29, 1999
----------------------------------------------------------
Frank Baldino, Jr., Ph.D. Director (Principal executive officer)
By: /s/ Bruce A. Peacock Executive Vice President, Chief Operating March 29, 1999
----------------------------------------------------------
Bruce A. Peacock Officer and Director
By: /s/ William P. Egan Director March 29, 1999
----------------------------------------------------------
William P. Egan
By: /s/ Robert J. Feeney, Ph.D. Director March 29, 1999
----------------------------------------------------------
Robert J. Feeney, Ph.D.
By: /s/ Martyn D. Greenacre Director March 29, 1999
----------------------------------------------------------
Martyn D. Greenacre
By: /s/ Kevin E. Moley Director March 29, 1999
----------------------------------------------------------
Kevin E. Moley
By: /s/ Horst Witzel, Dr.-Ing. Director March 29, 1999
---------------------------------------------------------
Horst Witzel, Dr.-Ing.
By: /s/ J. Kevin Buchi Senior Vice President, Finance and Chief March 29, 1999
---------------------------------------------------------
J. Kevin Buchi Financial Officer (Principal financial and
accounting officer)
</TABLE>
<PAGE>
CEPHALON, INC.
REGISTRATION STATEMENT ON FORM S-3
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
- ------ --------------------------------------------------------------------- ------
<S> <C>
5.1 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Morgan, Lewis & Bockius LLP (included in its opinion as
Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included as part of the signature page of this
Registration Statement)
</TABLE>
<PAGE>
EXHIBIT 5.1
-----------
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
March 30, 1999
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
Re: Cephalon, Inc. - Registration Statement on Form S-3 Relating to the
Registration of 1,945,000 shares of Common Stock, $.01 par value
----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Cephalon, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of the subject Registration
Statement on Form S-3 (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), relating to 1,945,000 shares (the "Shares") of
the Company's common stock, par value $.01 per share (the "Common Stock") to be
sold by the Selling Stockholders named in the Registration Statement. Of the
Shares, (i) 1,920,000 shares (the "Warrant Shares") will be issued from time to
time upon exercise of warrants, each dated March 1, 1999 (the "Warrants"), by
the Selling Stockholders, and (ii) 25,000 shares (the "Additional Warrant
Shares") will be issued from time to time upon exercise of warrants (the
"Additional Warrants") issued to Petkevich & Partners.
In rendering the opinion set forth below, we have examined the Registration
Statement and the exhibits thereto, certain records of the Company's corporate
proceedings as reflected in its minute books and such statutes, records and
other documents as we have deemed relevant. In our examination, we have assumed
the genuineness of documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies thereof.
Based on the foregoing, it is our opinion that the Warrant Shares when issued
pursuant to the Warrants and the Additional Warrant Shares when issued pursuant
to the Additional Warrants will be validly issued, fully paid and nonassessable.
The opinion set forth above is limited to the General Corporation Law of the
State of Delaware, as amended. We hereby consent to the use of this opinion as
Exhibit 5.1 to 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 or regulations of the
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>
EXHIBIT 23.2
------------
[LETTERHEAD OF 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 25, 1999
incorporated by reference in Cephalon, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our firm included in this
registration statement.
/s/ Arthur Andersen LLP
Philadelphia, PA
March 30, 1999
