FiercePharma  Feb 7  Comment 
Mylan signs off on $96.5M Provigil pay-for-delay settlement esagonowsky Tue, 02/07/2017 - 09:32
FiercePharma  Aug 9  Comment 
Teva's Cephalon forks over $125M in second pay-for-delay settlement chelfand Tue, 08/09/2016 - 17:10
Benzinga  Dec 14  Comment 
CTI BioPharma Corp. (NASDAQ: CTIC) today announced that it has received a $10 million milestone payment from Teva Pharmaceutical Industries Ltd. (Teva) related to the achievement of sales milestones for TRISENOX® (arsenic trioxide). TRISENOX...
newratings.com  Jul 30  Comment 
PETAH TIKVA (dpa-AFX) - Teva Pharmaceutical Industries Ltd. (TEVA) Thursday said its second-quarter attributable net income declined to $539 million from $748 million in the prior year. Earnings per share fell to $0.63 from $0.87. The latest...
FiercePharma  Jul 7  Comment 
AstraZeneca and Teva Pharmaceutical's Cephalon are forking over more than $50 million to settle claims by the U.S. government that the companies underpaid rebates owed through Medicaid prescription drug programs, the latest chapter in the...
newratings.com  Jul 7  Comment 
FRAZER (dpa-AFX) - AstraZeneca (AZN.L, AZN) has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate...
Reuters  May 28  Comment 
U.S. antitrust regulators have settled a long-running fight with Cephalon, now owned by Teva Pharmaceuticals, over how it resolved a patent infringement lawsuit tied to...
New York Times  May 28  Comment 
The agency accused the company of illegally blocking generic competition to Provigil, a sleep-disorder drug.
Wall Street Journal  May 28  Comment 


Cephalon, Inc. (Nasdaq:CEPH) is a biopharmaceutical company that develops and sells drugs to treat central nervous system disorders, pain, cancer, and addiction.[1] The company’s leading product is Provigil, which is used to treat sleepiness related to sleep apnea (snoring disorders). Provigil has fueled much of Cephalon’s double digit sales growth, generating nearly 10 million prescriptions and over $2 billion in cumulative revenue since its U.S. launch in 1999.[2] Recently, the company partnered with Takeda Pharmaceuticals North America to promote this product in the U.S., doubling the size of their sales force.

The second most important product for Cephalon is Actiq, which treats cancer pain. This medications accounts for approximately 34% of total consolidated sales. .[3]However, in 2007 Barr Laboratories entered the US market with a generic version of the drug which has caused an erosion in terms of product sales.

As with all pharmaceutical companies, Cephalon depends on a pipeline of newly developed drugs for to replace those (like Actiq) which exclusive patents have expired, allowing generic competition. In 2006, two of its products, Fentora and Vivitrol, were approved by the Food and Drug Administration (FDA).


Cephalon currently manufactures three drugs to serve the central nervous system (CNS) market. Provigil, which is used to treat excessive sleepiness associated with narcolepsy, obstructive sleep apnea and shift work sleep disorder, accounted for 49% of total company sales in 2007.[4] The company currently owns several patents rights related to this product that expire between 2014 and 2015. Nuvigil, expected to launch in 2010, is essentially an improved version of Provigil. Nuvigil's patent will run through 2023 and is expected to take over the market currently occupied by Provigil.[5] The final drug in the CNS portfolio is Gabitril which is used in the treatment of partial seizures in epileptic patients.

In the pain therapeutics segment, the company has Fentora, Actiq and generic OTFC, all of which are used to treat cancer pain. These products further accounted for another 29% of total sales. Patents for Fentora are slated to expire between 2019 and 2024, while Actiq's will expire between 2009 and 2010. Combined revenues from the CNS and pain segment drugs accounted for 78% of total sales. Other long- and short-acting formulations are also available in the market. Johnson & Johnson’s Duragesic and Purdue Pharmaceuticals’ Oxycontin and Ms-Contin, along with other generic equivalent dominates.

The products in the US oncology segment include Trisenox (an intravenous arsenic-based targeted therapy used to acute promyelocytic leukemia) and Treanda (a multi-functional hybrid cytotoxic used to treat chronic lymphocytic leukemia).[6]The pharmaceutical market for treatment of acute promyelocytic leukemia is served by other therapeutics like Vesanoid by Roche in combination with chemotheraphy. Treanda does not face any direct competition from currently available drugs but will compete with other traditional methods of treatment. The patent for Trisenox expires in 2018 while that for Treanda is still pending. If issued, it will be expected to last till 2025 and 2026.

In the addiction space, Cephalon currently has one product Vivitol for the treatment of alcohol dependence.[7]Licenses for this product will expire between 2013 and 2024 and the drug faces competition from Campral by Forest Laboratories and other currently marketed drugs formulated from naltexrone. Moreover, it is known that there are other laboratories investing in products that will treat alcohol dependence.

Image:CEPH Revenues and profits.JPG

The total sales at Cephalon have increased significantly over the past five years. Sales grew by 42.06% in 2004, 19.35% in 2005, and 45.56% in 2006 but slowed to 0.49% in 2007. However, the company has shown low levels of profitability and has even made losses in three out of the past five years.[8] This is because the company has invested heavily in R&D over the past few years - R&D as a percentage of sales has always exceeded 21%.[9] Moreover, it has also invested in major acquisitions, and the products being brought to market in the next few years will likely improve profitability.

Image:CEPH Revenue Breakdown.JPG

Sales for drugs targeting sleep disorders constitute close to half of total revenues, with another 29% coming from drugs that alleviate pain. However, the contribution of drugs in the “Others” category are likely to increase in the near future as they include oncology and addiction drugs that have recently come on the market or have not yet been marketed.

Trends & Forces

Growing US Pharmaceutical Sales Will Boost Cephalon's Revenues

IMS Health reported that prescription drug sales in the United States grew by 8.3% to $274.9B in 2006. Cephalon showed growth of 75% CAGR over the last seven years. This trend is likely to continue due to the aging baby boomers and increased spending on healthcare. The US remains Cephalon’s largest geographical market accounting for 83% of their total revenues in 2006, and with growing US pharmaceutical sales, Cephalon’s revenue should continue to rise as well.

Growing Oncology Market Will Increase Sales of Trisenox and Treanda

A report by Datamonitor predicts that the oncology(study of cancer) market will grow by 17-18% over the next few years.[10] Oncology is one of the main therapeutic areas that Cephalon focuses on. As cancer research and treatment grows, so will Cephalon's revenues through its products Trisenox and Treanda, which are used in leukemia therapy.

Pending Expiration of Provigil's Patent

Provigil, the flagship product of Cephalon, will be open to generic competition on April 6, 2015 when its patent expires.[11] This is an important event for the company as it currently derives close to half of its revenues from the sale of this single product. However, it has already developed an improved version of this drug Nuvigil which has been approved and is likely to take over the market share held by Provigil. If this goes according to Cephalon's plans, revenues will stay stable despite the expiration of the Provigil patent.

Pending Litigation Might Affect Future Prospects

In February 2008, the Federal Trade Commission sued Cephalon for violating antitrust laws by paying generic drug makers so that they would not bring a generic version of Provigil onto the market.[12] In the case, Cephalon entered a patent settlement agreement in 2006 with four generic firms that will allow them to sell a generic version of Provigil in 2012, three years before the end of Provigil's patent exclusivity. The FTC believes that this constitutes anti-competitive behavior. However, experts believe that a definitive court verdict will not take place earlier than 2012 and thus will not have any effect on the firm’s revenues.[13] Nuvigil (recently approved by the FDA), which is an improved version of Provigil, is expected to take over the entire market currently occupied by Provigil. The company is also expected to phase in Nuvigil in 2010 so that enough time and effort can be spent educating physicians about the merits of the new drug and ensuring that patients switch over to Nuvigil before generic versions of Provigil enter the marketplace in 2012.


The drugs Provigil and Nuvigil are the only drugs in the market that treat excessive day-time sleepiness associated with narcolepsy, obstructive sleep apnea and shift work sleep disorder. Given that there are no other similar drugs in clinical trials, Cephalon is likely to maintain a monopoly in this market for years to come.

Despite its monopoly in the wake-promoting market, it faces stiff competition in many of its other product areas such as oncology and pain.

Novartis AG (NVS) : Provigil has been used by doctors off-label to treat ADHD. In this area, it faces intense competition from Novarits which markets Ritalin.

Purdue Pharmaceuticals: With respect to pain therapeutics, Cephalon faces stiff competition from Purdue Pharmaceuticals which markets Oxycontin and MS-Contin which is the dominant product in market.

JOHNSON & JOHNSON (JNJ) : Cephalon’s pain drugs (Fentora and Actiq) also face competition from J&J’s Duragesic.

Roche Pharmaceuticals (RHHBY) : Roche which is strong in the oncology sector is also a strong competitor and presents a challenge to Cephalon. Vesanoid competes head to head with Trisenox.



  1. CEPH 2007 10-K
  2. CEPH 2007 10-K
  3. CEPH 2007 10-K
  4. CEPH 2007 10-K
  5. CEPH 2007 10-K
  6. Products: Cephalon website.
  7. Products: Cephalon website.
  8. CEPH 2007 10-K
  9. [Mergent Horizon. Cephalon Financials.]
  10. [Datamonitor. Company Profile: Cephalon. p5. April 11, 2007.]
  11. Cephalon gets six-month Provigil patent extension.
  12. U.S. FTC sues Cephalon over generic drug deals.
  13. [Eric Schmidt, Phil Nadeau &Leland Gershell.FTC Complaint More Bark Than Bite. Cowen and Company: Cephalon.]
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