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`EXHIBIT 2014
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`TABLE OF CONTENTS
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`(Mark One)
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
` Washington, D.C. 20549
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`FORM 10-K
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`ý
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`o
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` ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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`For the fiscal year ended December 31, 2009
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`or
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` TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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`For the transition period from to
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`Commission File Number 000-19119
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`Cephalon, Inc.
` (Exact Name of Registrant as Specified in Its Charter)
`
`Delaware
`(State or Other Jurisdiction of
`Incorporation or Organization)
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`41 Moores Road
`P.O. Box 4011
`Frazer, Pennsylvania
`(Address of Principal Executive
`Offices)
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`
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`23-2484489
`(I.R.S. Employer
`Identification No.)
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`19355
`(Zip Code)
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`Registrant's telephone number, including area code: (610) 344-0200
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`Securities registered pursuant to Section 12(b) of the Act:
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`Title of each class
`Common Stock, par value $0.01 per share
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`Name of each exchange on which
`registered
`NASDAQ Global Select Market
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`Securities registered pursuant to Section 12(g) of the Act:
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`None
` (Title of Class)
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`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
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`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
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`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
`1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
`such filing requirements for the past 90 days. Yes ý No o
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`CEPHALON, INC. -- EXHIBIT 2014 0001
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`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
`required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
`shorter period that the registrant was required to submit and post such files). Yes o No o
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`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
`to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
`amendment to this Form 10-K. ý
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`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
`See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.:
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`Large accelerated filer ý
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`Accelerated filer o
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`Non-accelerated filer o
`(Do not check if a
`smaller reporting company)
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`
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`Smaller reporting company o
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`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
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`The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2009, was approximately $2.6 billion. Such
`aggregate market value was computed by reference to the closing price of the Common Stock as reported on the NASDAQ Global Select Market on
`June 30, 2009. For purposes of making this calculation only, the registrant has defined affiliates as including only directors and executive officers
`and shareholders holding greater than 10% of the voting stock of the registrant as of June 30, 2009.
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`The number of shares of the registrant's Common Stock outstanding as of February 8, 2010 was 74,930,978.
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`DOCUMENTS INCORPORATED BY REFERENCE
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`Portions of the registrant's definitive proxy statement for its 2010 annual meeting of stockholders are incorporated by reference into Items 10, 11, 12,
`13, and 14 of Part III of this Form 10-K.
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`CEPHALON, INC. -- EXHIBIT 2014 0002
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` Cautionary Note Regarding Forward-Looking Statements
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` PART I
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` Item 1.
` Item 1A.
` Item 1B.
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` Item 2.
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` Item 3.
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` Item 4.
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` Business
` Risk Factors
` Unresolved Staff Comments
` Properties
` Legal Proceedings
` Submission of Matters to a Vote of Security Holders
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` Item 5.
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` Item 6.
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` Item 7.
` Item 7A.
` Item 8.
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` Item 9.
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` Item 9A.
` Item 9B.
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` Item 10.
` Item 11.
` Item 12.
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` Item 13.
` Item 14.
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` PART II
` Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
`Equity Securities
` Selected Financial Data
` Management's Discussion and Analysis of Financial Condition and Results of Operations
` Quantitative and Qualitative Disclosures About Market Risk
` Financial Statements and Supplementary Data
` Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
` Controls and Procedures
` Other Information
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` PART III
` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
`Matters
` Certain Relationships and Related Transactions, and Director Independence
` Principal Accountant Fees and Services
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` PART IV
` Exhibits and Financial Statement Schedules
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` Item 15.
` SIGNATURES
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`CEPHALON, INC. -- EXHIBIT 2014 0003
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`CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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`In addition to historical facts or statements of current condition, this report and the documents into which this report is and will be incorporated
`contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
`Exchange Act of 1934, as amended. Forward-looking statements contained in this report or incorporated herein by reference constitute our
`expectations or forecasts of future events as of the date this report was filed with the Securities and Exchange Commission and are not statements
`of historical fact. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may
`include words such as "anticipate," "will," "estimate," "expect," "project," "intend," "should," "plan," "believe," "hope," and other words and
`terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives
`and business strategies, regulatory or competitive environments, our intellectual property and product development. In particular, these forward-
`looking statements include, among others, statements about:
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`our dependence on sales of PROVIGIL® (modafinil) Tablets [C-IV] and NUVIGIL® (armodafinil) Tablets [C-IV] in the United States
`and the market prospects and future marketing efforts for PROVIGIL, NUVIGIL, FENTORA&eeg; (fentanyl buccal tablet) [C-II],
`AMRIX® (cyclobenzaprine hydrochloride extended-release capsules) and TREANDA® (bendamustine hydrochloride);
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`any potential approval of our product candidates, including with respect to any expanded indications for NUVIGIL and/or
`FENTORA;
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`our anticipated scientific progress in our research programs and our development of potential pharmaceutical products including our
`ongoing or planned clinical trials, the timing and costs of such trials and the likelihood or timing of revenues from these products, if
`any;
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`our ability to adequately protect our technology and enforce our intellectual property rights and the future expiration of patent
`and/or regulatory exclusivity on certain of our products;
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`our ability to comply fully with the terms of our settlement agreements (including our corporate integrity agreement) with the U.S.
`Attorney's Office ("USAO"), the U.S. Department of Justice ("DOJ"), the Office of the Inspector General of the Department of Health
`and Human Services ("OIG") and other federal government entities, the Offices of the Attorneys General of Connecticut and
`Massachusetts and the various states;
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`our ongoing litigation matters, including litigation stemming from the settlement of the PROVIGIL patent litigation, the FENTORA
`patent infringement lawsuits we have filed against Watson Laboratories, Inc. ("Watson") and Barr Laboratories, Inc. ("Barr"), the
`AMRIX patent infringement lawsuits we have filed against Barr, Mylan Pharmaceuticals, Inc. ("Mylan"), Impax Laboratories, Inc.
`("Impax") and Anchen Pharmaceuticals, Inc. ("Anchen"), and the NUVIGIL patent infringement lawsuits we have filed against
`Actavis Pharma Manufacturing Pvt Ltd. ("Actavis"), Mylan, Sandoz, Inc. ("Sandoz"), Teva Pharmaceuticals USA, Inc. ("Teva") and
`Watson;
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`our future cash flow, our ability to service or repay our existing debt and our ability to raise additional funds, if needed, in light of
`our current and projected level of operations, acquisition activity and general economic conditions; and
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`other statements regarding matters that are not historical facts or statements of current condition.
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`Any or all of our forward-looking statements in this report and in the documents we have referred you to may turn out to be wrong. They can be
`affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Therefore, you should not place undue
`reliance on any such forward-looking statements. The factors that could cause actual results to differ from those expressed or implied by our
`forward-looking statements include, among others:
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`the acceptance of our products by physicians and patients in the marketplace, particularly with respect to our recently launched
`products;
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`our ability to obtain regulatory approvals to sell our product candidates, including any additional future indications for FENTORA
`and NUVIGIL, and to launch such products or indications successfully;
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`scientific or regulatory setbacks with respect to research programs, clinical trials, manufacturing activities and/or our existing
`products;
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`the timing and unpredictability of regulatory approvals;
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`unanticipated cash requirements to support current operations, expand our business or incur capital expenditures;
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`a finding that our patents are invalid or unenforceable or that generic versions of our marketed products do not infringe our patents
`or the "at risk" launch of generic versions of our products;
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`the loss of key management or scientific personnel;
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`the activities of our competitors in the industry;
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`regulatory, legal or other setbacks or delays with respect to the settlement agreements with the USAO, the DOJ, the OIG and other
`federal entities, the state settlement agreements and corporate integrity agreement related thereto, the settlement agreements with
`the Offices of the Attorneys General of Connecticut and Massachusetts, our settlements of the PROVIGIL patent litigation and the
`ongoing litigation related to such settlements, the FENTORA patent infringement lawsuit we have filed against Watson, the AMRIX
`patent infringement lawsuits we have filed against Barr, Mylan, Impax and Anchen, the NUVIGIL patent infringement lawsuits we
`have filed against Actavis, Mylan, Sandoz, Teva and Watson and the NUVIGIL Paragraph IV notice received from Lupin Limited;
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`our ability to integrate successfully technologies, products and businesses we acquire and realize the expected benefits from those
`acquisitions;
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`unanticipated conversion of our convertible notes by our note holders;
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`market conditions generally or in the biopharmaceutical industry that make raising capital or consummating acquisitions difficult,
`expensive or both;
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`the effect of volatility of currency exchange rates; and
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`enactment of new government laws, regulations, court decisions, regulatory interpretations or other initiatives that are adverse to us
`or our interests.
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`We do not intend to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise, except as
`required by law. We discuss in more detail the risks that we anticipate in Part I, Item 1A of this Annual Report on Form 10-K. This discussion is
`permitted by the Private Securities Litigation Reform Act of 1995.
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`CEPHALON, INC. -- EXHIBIT 2014 0005
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` ITEM 1. BUSINESS
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`Overview
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`PART I
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`Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and commercialization of innovative
`products in four core therapeutic areas: central nervous system ("CNS"), pain, oncology and inflammatory disease. In addition to conducting an
`active research and development program, we market seven proprietary products in the United States and numerous products in various countries
`throughout Europe and the world. Consistent with our core therapeutic areas, we have aligned our approximately 775-person U.S. field sales and
`sales management teams by area. We have a sales and marketing organization numbering approximately 335 persons that supports our presence in
`nearly 50 countries in Europe, the Middle East and Africa and have a strong presence in the five key European pharmaceutical markets: France,
`Germany, Italy, Spain and the United Kingdom, and affiliates in Benelux and Poland. For the year ended December 31, 2009, our total revenues and
`net income attributable to Cephalon, Inc. were $2.2 billion and $342.6 million, respectively. Our revenues from U.S. and European operations are
`detailed in Note 19 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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`On January 31, 2010, we entered into a Share Purchase Agreement with Mepha Holding AG pursuant to which we agreed to purchase all of the
`issued share capital of Mepha AG ("Mepha"), a privately-held, Swiss-based pharmaceutical company, for CHF 622.5 million (or approximately
`US$590 million) in cash, subject to certain closing adjustments. The closing of the transaction is subject to customary closing conditions, including
`receipt of the applicable antitrust approvals. The transaction is expected to close in the second quarter of 2010. Founded in 1949, Mepha markets
`branded and non-branded generics as well as specialty products in more than 50 countries. Mepha develops and manufactures its products in
`Aesch/Basel, Switzerland with a focus on Swiss-quality standards. Mepha's research and development focuses on the development of improved
`and innovative generics providing additional benefits for patients. Furthermore, Mepha is active in malaria research offering innovative life-saving
`therapies for adults and children. Mepha is the leading company on the Swiss generic market, with more than 120 products in over 500 packaging
`forms. Mepha has operational subsidiaries in Portugal and the Baltics. Through partnerships, Mepha markets its products in other European
`countries, in the Middle East, Africa, South and Central America as well as in Asia. Mepha employs approximately 1,000 people worldwide, 500 of
`them in Switzerland.
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`We have recently completed certain transactions designed to build a portfolio of potential products targeted to treat inflammatory diseases. In 2009,
`we (i) acquired Arana Therapeutics Limited, an Australian company, whose lead domain antibody compound, CEP-37247, is in Phase II
`development for patients with certain inflammatory diseases; (ii) acquired an exclusive, worldwide license to the ImmuPharma investigational
`compound, LUPUZOR™, which is in Phase IIb development for the treatment of systemic lupus erythematosus; (iii) purchased an option to acquire
`privately-held Ception Therapeutics, Inc., whose lead humanized monoclonal antibody compound, reslizumab, is in Phase II development for
`eosinophilic asthma; and (iv) purchased an option to acquire privately-held BioAssets Development Corporation, which has an intellectual
`property estate around use of TNF inhibitors for sciatic pain in patients with intervertebral disk herniation, as well as other spinal disorders, which
`intellectual property we expect to utilize to develop CEP-37247 as a possible treatment of sciatica. For more information regarding these
`transactions, please see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent
`Acquisitions and Transactions."
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`Our most significant products are our wakefulness products, PROVIGIL® (modafinil) Tablets [C-IV] and NUVIGIL® (armodafinil) Tablets [C-IV],
`which comprised 51% of our total consolidated net sales for the year ended December 31, 2009, of which 94% was in the U.S. market. For the year
`ended December 31, 2009, combined consolidated net sales of PROVIGIL and NUVIGIL increased
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`11% over the year ended December 31, 2008. In June 2007, we secured final U.S. Food and Drug Administration (the "FDA") approval of the
`NUVIGIL indication for the treatment of excessive sleepiness associated with narcolepsy, obstructive sleep apnea/hypopnea syndrome
`("OSA/HS") and shift work sleep disorder ("SWSD"). We launched NUVIGIL on June 1, 2009. In March 2009, we announced positive results from a
`Phase II clinical trial of NUVIGIL as adjunctive therapy for treating major depressive disorder in adults with bipolar I disorder and our plan to
`advance to Phase III trials for this indication. In April 2009, we announced positive results from a Phase III clinical trial of NUVIGIL as a treatment
`for excessive sleepiness associated with jet lag disorder and filed a supplemental new drug application (an "sNDA") for this indication with the
`FDA in June 2009. We expect a response from the FDA by March 29, 2010. In May 2009, we announced positive results from a Phase IV study of
`NUVIGIL in obstructive sleep apnea and co-morbid major depressive disorder requiring ongoing antidepressant therapy.
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`On a combined basis, our two next most significant products are FENTORA® (fentanyl buccal tablet) [C-II] and ACTIQ® (oral transmucosal
`fentanyl citrate) [C-II] (including our generic version of ACTIQ ("generic OTFC")). Together, these products comprise 17% of our total
`consolidated net sales for the year ended December 31, 2009, of which 80% was in the U.S. market. In October 2006, we launched FENTORA in the
`United States. FENTORA is indicated for the management of breakthrough pain in patients with cancer who are already receiving and are tolerant to
`opioid therapy for their underlying persistent cancer pain. In April 2008, we received marketing authorization from the European Commission for
`EFFENTORA™ for the same indication as FENTORA and launched the product in certain European countries in January 2009. We have focused
`our clinical strategy for FENTORA on studying the product in opioid-tolerant patients with breakthrough pain associated with chronic pain
`conditions, such as neuropathic pain and back pain. In November 2007, we submitted an sNDA to the FDA seeking approval to market FENTORA
`for the management of breakthrough pain in opioid tolerant patients with chronic pain conditions. In early April 2009, we submitted a Risk
`Evaluation and Mitigation Strategy (the "REMS Program") with respect to FENTORA. Subject to the timing and nature of further discussions with
`the FDA, we expect to receive a response from the FDA regarding the FENTORA REMS Program by the middle of 2010. For more information
`regarding our FENTORA REMS Program, please see "Pain—FENTORA" below. With respect to ACTIQ, its sales have been meaningfully eroded
`by the launch of FENTORA and by generic OTFC products sold since June 2006 by Barr Laboratories, Inc. and by us through our sales agent,
`Watson Pharmaceuticals, Inc. We expect this erosion will continue. In September 2009, our obligation to supply Barr with generic OTFC ended
`pursuant to the terms of a license and supply agreement we entered into with Barr in July 2004. In October 2009, we understand that the FDA
`approved ANDAs by Barr and by Covidien to market and sell generic OTFC. We submitted our REMS Program for ACTIQ and generic OTFC in
`early April 2009. We expect to receive a response from the FDA by the middle of 2010.
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`In March 2008, the FDA granted an orphan drug approval for TREANDA® (bendamustine hydrochloride) for the treatment of patients with chronic
`lymphocytic leukemia ("CLL") and, in April 2008, the product was launched. In October 2008, we received FDA approval of TREANDA for
`treatment of patients with indolent B-cell non-Hodgkin's lymphoma ("NHL") who have progressed during or within six months of treatment with
`rituximab or a rituximab-containing regimen. TREANDA comprised 10% of our total consolidated net sales for the year ended December 31, 2009, all
`of which were in the U.S. market. While not a currently approved indication by the FDA, TREANDA was recently listed in the 2010 NCCN clinical
`practice guidelines as a front-line treatment for NHL. We believe the guidelines listing was the result of an independent Phase III clinical study
`conducted by the German Study Group for Indolent Lymphomas ("StiL Group") in Giessen, Germany. The StiL Group's study results announced in
`December 2009 indicated better tolerability and more than a 20-month improvement in median progression free survival in patients treated with
`TREANDA in combination with rituximab versus cyclophosphamide, doxorubicin, vincristine, and prednisolone (commonly known as CHOP) in
`combination with rituximab for the first-line treatment of patients with advanced
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`follicular, indolent, and mantle cell lymphomas, each of which is not currently an FDA-approved indication.
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`In August 2007, we acquired exclusive North American rights to AMRIX® (cyclobenzaprine hydrochloride extended-release capsules) from E.
`Claiborne Robins Company, Inc., a privately-held company d/b/a ECR Pharmaceuticals ("ECR"). Two dosage strengths of AMRIX (15 mg and 30
`mg) were approved in February 2007 by the FDA for short-term use as an adjunct to rest and physical therapy for relief of muscle spasm associated
`with acute, painful musculoskeletal conditions. We made the product available in the United States in October 2007 and commenced a full U.S.
`launch in November 2007. In June 2008, the U.S. Patent and Trademark Office (the "PTO") issued a pharmaceutical formulation patent for AMRIX,
`which expires in February 2025.
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`In late 2005 and early 2006, we entered into PROVIGIL patent settlement agreements with certain generic pharmaceutical companies. As part of
`these separate settlements, we agreed to grant to each of these parties a non-exclusive royalty-bearing license to market and sell a generic version
`of PROVIGIL in the United States, effective in April 2012, subject to applicable regulatory considerations. Under the agreements, the licenses could
`become effective prior to April 2012 only if a generic version of PROVIGIL is sold in the United States prior to this date. We filed each of the
`settlements with both the U.S. Federal Trade Commission (the "FTC") and the Antitrust Division of the U.S. Department of Justice (the "DOJ") as
`required by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Medicare Modernization Act"). The FTC
`conducted an investigation of each of the PROVIGIL settlements and, in February 2008, filed suit against us challenging the validity of the
`settlements and related agreements. The complaint alleges a violation of Section 5(a) of the Federal Trade Commission Act and seeks to
`permanently enjoin us from maintaining or enforcing these agreements and from engaging in similar conduct in the future. We believe the FTC
`complaint is without merit and we have filed a motion to dismiss the case. While we intend to vigorously defend ourselves and the propriety of the
`settlement agreements, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no
`assurance that these efforts will be successful. For more information regarding our PROVIGIL settlements and related litigation, please see Note 16
`to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.
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`In September 2008, as part of our settlement with the U.S. government regarding their investigation of our promotional practices with respect to
`ACTIQ, GABITRIL and PROVIGIL, we entered into a five-year Corporate Integrity Agreement (the "CIA") with the Office of Inspector General of
`the Department of Health and Human Services. The CIA provides criteria for establishing and maintaining compliance with federal laws governing
`the marketing and promotion of our products. We are also subject to periodic reporting and certification requirements attesting that the provisions
`of the CIA are being implemented and followed.
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`We are or may become a party to litigation in the ordinary course of our business, including, among others, matters alleging employment
`discrimination, product liability, patent or other intellectual property rights infringement, patent invalidity or breach of commercial contract. In
`particular, as a biopharmaceutical company, our future success is highly dependent on obtaining and maintaining patent protection or regulatory
`exclusivity for our products and technology. In that regard, we are currently engaged in lawsuits with respect to generic company challenges to the
`validity and/or enforceability of our patents covering AMRIX, FENTORA and NUVIGIL. We intend to vigorously defend the validity, and prevent
`infringement, of our patents. The loss of patent protection or regulatory exclusivity on any of our existing products, whether by third-party
`challenge, invalidation, circumvention, license or expiration, could materially impact our results of operations. For more information regarding the
`legal proceedings described in this Overview and others, please see Note 16 to our Consolidated Financial Statements included in Part II, Item 8 of
`this Annual Report on Form 10-K, which is incorporated herein by reference.
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`We have significant discovery research programs focused on developing therapeutics to treat cancers. Our technology principally focuses on an
`understanding of kinases and proteases and the role they play in cellular integrity survival and proliferation. We have coupled this knowledge with
`a library of novel, small, orally-active synthetic molecules that inhibit the activities of specific kinases. We also have reinforced our commitment to
`the treatment of inflammatory diseases through the use of biologics. Our entry into the biologics space combined with our efforts with our small
`molecule products creates opportunities to address unmet medical needs. We also work with our collaborative partners to provide a more diverse
`therapeutic breadth and depth to our research efforts.
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`While we seek to increase profitability and cash flow from operations, we will need to continue to achieve growth of product sales and other
`revenues sufficient for us to attain these objectives. The rate of our future growth will depend, in part, upon our ability to obtain and maintain
`adequate intellectual property protection for our currently marketed products, and to successfully develop or acquire and commercialize new
`product candidates.
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`We are a Delaware corporation with our principal executive offices located at 41 Moores Road, P.O. Box 4011, Frazer, Pennsylvania 19355. Our
`telephone number is (610) 344-0200 and our web site address is http://www.cephalon.com. Our research and development headquarters are in West
`Chester, Pennsylvania and we also have offices in Wilmington, Delaware, Salt Lake City, Utah, suburban Minneapolis-St. Paul, Minnesota, France,
`the United Kingdom, Ireland, Denmark, Germany, Italy, the Netherlands, Poland, Spain, Switzerland, Australia, Hong Kong and certain other
`countries. We have manufacturing facilities in France for the production of modafinil, which is used in the production of PROVIGIL. We also have
`manufacturing facilities in Salt Lake City, Utah, for the production of FENTORA, EFFENTORA, ACTIQ and generic OTFC for worldwide
`distribution and sale, and Eden Prairie and Brooklyn Park, Minnesota, for the production of orally disintegrating versions of drugs for
`pharmaceutical company partners.
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`Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available
`free of charge through the Investor Information section of our web site as soon as reasonably practicable after such material is electronically filed
`with or furnished to the Securities and Exchange Commission. We include our web site address in this Annual Report on Form 10-K only as an
`inactive textual reference and do not intend it to be an active link to our web site.
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`CENTRAL NERVOUS SYSTEM DISORDERS
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`Our CNS disorders portfolio includes three FDA-approved and marketed products: NUVIGIL, for improving wakefulness in patients with excessive
`sleepiness associated with narcolepsy, OSA/HS and SWSD; PROVIGIL, for the same labeled indications as NUVIGIL; and GABITRIL, for use as
`adjunctive therapy in the treatment of partial seizures in epileptic patients.
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`Modafinil Products
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`NUVIGIL
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`An important focus of our modafinil strategy has been the development of our next-generation compound, NUVIGIL, a single-isomer formulation of
`modafinil. In June 2007, we received final FDA approval to market NUVIGIL for the treatment of excessive sleepiness associated with narcolepsy,
`OSA/HS and SWSD. The product is protected by a composition of matter patent that will expire on December 18, 2023 and covers a novel
`polymorphic form of armodafinil, the active pharmaceutical ingredient in NUVIGIL. We launched NUVIGIL on June 1, 2009. In March 2009, we
`announced positive results from a Phase II clinical trial of NUVIGIL as adjunctive therapy for treating major depressive disorder in adults with
`bipolar I disorder and our plan to advance to Phase III trials for this
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`Table of Contents
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`indication. In April 2009, we announced positive results from a Phase III clinical trial of NUVIGIL as a treatment for excessive sleepiness associated
`with jet lag disorder and filed a supplemental new drug application (an "sNDA") for this indication with the FDA in June 2009. We expect a
`response from the FDA by March 29, 2010. In May 2009, we announced positive results from a Phase IV study of NUVIGIL in obstructive sleep
`apnea and comorbid major depressive disorder requiring ongoing antidepressant therapy.
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`We also have ongoing clinical studies for NUVIGIL focused on adjunctive treatment to atypical anti-psychotics in schizophrenia patients,
`adjunctive treatment for bi-polar depression and excessive sleepiness associated with traumatic brain injury. In clinical studies, NUVIGIL was
`generally well-tolerated. The most common side effects were mainly mild to moderate in severity and included nausea, headaches, dizziness,
`diarrhea, decreased appetite and upset stomach.
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`PROVIGIL
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`Modafinil, the active ingredient in PROVIGIL, is the first in a new class of wake-promoting agents. While its exact mechanism of action remains to
`be fully elucidated, modafinil appears to act selectively in regions of the brain believed to regulate normal sleep and wakefulness. The FDA
`approved PROVIGIL to improve wakefulness in patients with excessive daytime sleepiness associated with narcolepsy, and we launched the
`product in the United States in February 1999. In January 2004, we received FDA approval to expand the label for PROVIGIL to include improving
`wakefulness in patients with excessive sleepiness associated with OSA/HS and SWSD. In clinical studies, PROVIGIL was generally well-tolerated,
`with a low incidence of adverse events relative to placebo. The most commonly observed adverse events were headache, infection, nausea,
`nervousness, anxiety and insomnia.
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`Outside of the U.S., modafinil currently is approved in more than 30 countries, including France, the United Kingdom, Ireland, Italy and Germany,
`for the treatment of excessive daytime sleepiness associated