Cephalon: Rare Biopharmaceutical Value Play for 2007
From BioHealth Investor In December, biopharmaceutical company Cephalon Inc. (CEPH) made the announcement that it has reduced its debt levels by exchanging a combination of cash and stock for $337 million in convertible notes. Cephalon exchanged $161.6 million of its…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
From BioHealth Investor
In December, biopharmaceutical company Cephalon Inc. (CEPH) made the announcement that it has reduced its debt levels by exchanging a combination of cash and stock for $337 million in convertible notes. Cephalon exchanged $161.6 million of its zero coupon convertible subordinated notes due June 2008 and $175.4 million of similar notes due June 2010 for $101.6 million in cash payments and 4.3 million common shares.
The company expects to book a related $20.8 million charge in its fourth quarter.
As a results of the transactions, Cephalon reduced its 2007 outlook for basic adjusted income to $4.15 to $4.25 per share.
The company said its 2006 earnings and sales outlook remain unchanged, as does its 2007 sales forecast. In November, Cephalon projected 2006 sales of $1.66 billion to $1.68 billion and basic adjusted income of $5.10 to $5.20 per share. Sales in 2007 should range from $1.68 billion to $1.73 billion.
Also, Cephalon announced in December that FDA would likely delay a final approval decision on its drug Nuvigil for excessive sleepiness while the agency continues to investigate a case of a potentially serious skin rash seen with a related medicine. The company however reiterated it’s sales forecast for 2007 and do not expect a significant effect from this delay since they expected to have a "modest" launch of Nuvigil which is expected to replace Provigil once it’s patent expires.
Cephalon has done a great job of managing its product life cycle by developing Nuvigil and launching it before Provigil patent expires.
CEPH stock is currently at $69.75 and trading at about 15X 2007 expected earnings and well off of it’s 52 week high of $82.92. I consider this level a great value and opening a position at these levels. The chart to the right shows a down side risk to $55 where the stock would be trading at Dirt Cheap prices. I think given the relatively safe earnings prediction as well as the new capital structure the stock has little risk of down side move given the overall sector does not take a major hit.
http://www.biohealthinvestor.com/
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
