Thursday, October 28, 2010

Cephalon Raises Estimates for 2010, 2011 Again

Cephalon (CEPH) again raised estimates for 2010 to $8.3 and provided guidance for 2011 of $8.55. Typically though, don't expect much action in the stock tomorrow. Although the stock remains incredibly cheap at a sub 8 PE, the market is concerned about drugs coming off patent and a slowing of growth.

Its interesting listening to conference calls as analysts dig down into minute details. They seem to over analyze every bit of data and seem to miss the big picture that this biotech company has a great management team that continues to under promise and over deliver.

CEPH now has $1.2B in cash and annual cash flow of around $1B though they do have $1B in debt. At a market cap of $5B the company could theoretically buyback 20% of the company just using the annual cash flow. That of course wouldn't be the best use of cash as I'd rather see them continue to buy up small biotechs with promising drugs that they can use their expertise to help bring to market. It is a great indication of the value prospects of this company. Investors tend to forget that great companies like CEPH generate huge cash flow every day they turn on the lights. Even if they don't grow, the company will pile up huge hoards of cash.

Leading drug Provigil goes off patent soon causing the stock to be depressed, but don't fret too much on the future as this management team will find a way to continue growing the company.


PR Highlights:

  • Quarterly Sales and Earnings Exceed Top End of Guidance
  • Quarterly Sales of $707 Million Increased 32 Percent
  • Quarterly Basic Adjusted EPS of $2.27 Increased 34 Percent
  • Quarterly Cash from Operations Totaled $272 Million
  • Total sales guidance is $2.69-$2.73 billion. This includes expected CNS franchise sales of $1.34-$1.37 billion, pain franchise sales of $510-$530 million, oncology franchise sales of $500-$520 million, and other product sales of $325-$345 million
  • Adjusted net income guidance is increased to$617-$632 million and basic adjusted income per common share guidance is increased to $8.20-$8.40, assuming 75.2 million basic shares outstanding.
  • full year 2011 sales guidance of $2.96-$3.04 billion.  This includes CNS franchise sales of $1.39-$1.43 billion, pain franchise sales of $540-$570 million, oncology franchise sales of $570-$600 million
  • The company also is introducing adjusted net income guidance for full year 2011 of $652-$668 million.  Cephalon is introducing 2011 adjusted net income per common share guidance of $8.45-$8.65, assuming 77.2 million basic shares outstanding.  


Disclosure: Long CEPH

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