- Additional Proxy Soliciting Materials (definitive) (DEFA14A)
April 07 2011 - 6:02AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN CONSENT STATEMENT
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Materials Pursuant to Section 240.14a-12
Cephalon, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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2
Cephalon, Inc. (the "Company"), its directors and certain of its officers and employees may
be deemed to be participants in the solicitation of consent revocations from stockholders in
connection with a consent solicitation by Valeant Pharmaceuticals International, Inc.
("Valeant") to replace the Company's current Board of Directors with nominees of Valeant.
The Company plans to file a consent revocation statement with the Securities and
Exchange Commission (the "SEC") in connection with the solicitation of written consent
revocations in connection with Valeant's consent solicitation (the "Consent Revocation
Statement").
Information regarding the names of the Company's directors and other
participants in the solicitation and their respective interests in the Company by security
holdings or otherwise is set forth in the Company's proxy statement relating to its 2011
annual meeting of stockholders, which may be obtained free of charge at the SEC's website
at http://www.sec.gov and the Company's website at http://www.cephalon.com.
Additional
information regarding the interests of such potential participants will be included in the
Consent Revocation Statement and other relevant documents to be filed with the SEC in
connection with the consent solicitation.
Promptly after filing its definitive Consent Revocation Statement with the SEC, the
Company will mail the definitive Consent Revocation Statement and a form of white consent
revocation card to each stockholder entitled to deliver a written consent in connection with
the consent solicitation.
3
3
WE URGE INVESTORS TO READ THE CONSENT REVOCATION STATEMENT
(INCLUDING ANY SUPPLEMENTS THERETO), THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT REGARDING ANY TENDER OFFER
THAT MAY BE COMMENCED BY VALEANT, AND ANY OTHER RELEVANT
DOCUMENTS THAT THE COMPANY WILL FILE WITH THE SEC WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Stockholders will be able to obtain, free of charge, copies of the Consent Revocation
Statement, the solicitation/recommendation statement and any other documents filed by the
Company with the SEC in connection with the consent solicitation or any tender offer at the
SEC's website at http://www.sec.gov, at the Company's website at
http://www.cephalon.com, or by contacting Innisfree M&A Incorporated at (877) 800-5186
(banks and brokers call collect at (212) 750-5833).
4
Safe Harbor Statement
This presentation contains forward-looking statements that involve risks
and uncertainties. These statements may concern, among other things,
our business strategy and market opportunities, the development of
pharmaceutical products, and future financial and operating results.
Additional information that may affect our business and financial prospects,
as well as factors that would cause our actual performance to vary from our
expectations, may be found in our filings with the Securities and Exchange
Commission
.
5
Situation Overview & Strategy
6
6
Situation Overview
§
On March 3, the Valeant and Cephalon CEOs had an introductory meeting. No proposal
of any kind was made
§
On March 18, Cephalon received a letter from Valeant with a $73 per share proposal for
100% of Cephalon shares -
Valeant requested a response by April 1
§
On March 25, one week before Valeant's requested response date, Cephalon received a
second letter from Valeant reiterating its $73 per share proposal
and adding
a second
insufficiently defined alternative to acquire certain assets for $2.8 billion -
at the same
time,
Valeant shortened the response date to March 29
§
By reducing Cephalon’s time to evaluate these alternatives, it was not feasible for
Cephalon to thoroughly review the proposals with its Board
§
Upon receiving Valeant’s first proposal on March 18, Cephalon promptly informed the
Board of the proposal and quickly began reviewing the proposal with the assistance of
its financial and legal advisors
§
Before Cephalon could properly review the proposals with its Board, Valeant went
public with its $73 proposal on March 29 and announced its intent to commence a
Consent Solicitation Process
§
On April 5, Cephalon’s Board formally rejected Valeant’s unsolicited proposal, deeming
it inadequate and not in the best interests of Cephalon’s shareholders
7
7
Valeant’s Strategy: “Speed” at the Expense
of Process Harms Cephalon Shareholders
§
Valeant is attempting to quickly force a takeover that is not in the
best interest of Cephalon’s shareholders
“We maximize speed and believe “deal process” creates distractions.”
- Valeant’s Transaction Operating Principles, Investor Presentation, March 30, 2011
§
If they succeed in forcing us to act quickly, we will be unable to
maximize value for Cephalon shareholders
§
The market’s reaction in Valeant’s and Cephalon’s stock prices
clearly demonstrates that Valeant is significantly undervaluing
Cephalon
“There’s a general awareness that this is a steal.” -
Jack Ablin, Harris Private Bank
“Valeant Pharmaceuticals’ hostile bid for Cephalon is so low that Valeant could raise the
offer by 15 percent and still pay less than any drug takeover in history.”
- Bloomberg News, March 31, 2011
8
8
Cephalon’s Approach
§
We have built a leading, global biopharmaceutical platform
that is diversified across both products and geographies
§
Over the past two years, Cephalon has created one of the
broadest late-stage pipelines in the industry
§
This pipeline has significant near- to mid-term commercial
potential, which has been given little-to-no value in Valeant’s
proposal or in public comments by Valeant’s CEO
9
Our Assessment of Valeant’s Proposal
10
10
Valeant’s $73 Proposal is Inadequate
§
30-day average of $56.74 is near our 52-week low and
not
the
appropriate reference point
§
Premium is significantly below precedent life sciences
benchmarks
§
It is based on a “worst-case” scenario
§
It ascribes little-to-no value to Cephalon’s late-stage pipeline
§
It does not reflect the scarcity value of life sciences assets that
“move the needle”
11
11
Valeant’s $73 Proposal Represents
Virtually NO Premium to 52-Week High
Premium to 30 days prior
Note:
2006-2011 YTD pharmaceutical, specialty pharmaceutical and biotechnology precedent transactions with US-listed target, enterprise value > $500 million,
> 50% cash consideration (n = 34).
Excludes large-cap mergers (e.g. Pfizer / Wyeth and Merck / Schering Plough).
Purchase prices exclude contingent
value rights (CVRs).
Source:
Bloomberg, press releases and news articles, company filings.
Premium to last close
Premium to 52-week high
20.4%
0.4%
58.7%
29.6%
47.6%
24.3%
Median life
sciences bid
premium
Cephalon @ $73
Median life
sciences bid
premium
Cephalon @ $73
Median life
sciences bid
premium
Cephalon @ $73
12
12
Valeant Proposal Based on
Worst-Case Scenario
§
Valeant’s $73 proposal is based on a worst-case scenario
“We took the
absolute
worst case as one of our analyses....we assumed the worst, the worst in
terms of IP, the worst in terms of sort of everything, everything we could think of...if the worst
thing happens, no matter what, we don't want to destroy shareholder value...”
“…we don't believe we are going to destroy a ton of our shareholders' value, but we are certainly
not going to create any. There might be some. That is all worst case…”
- Michael Pearson, Valeant Chairman & CEO, on investor call on March 30, 2011
Cephalon should not be valued based on a worst-case scenario
13
13
Valeant’s Proposal Ascribes Little-to-No
Value to Cephalon’s Late-Stage Pipeline
§
Valeant does not believe in R&D and ascribes little-to-
no value to Cephalon’s late-stage pipeline
“Do not bet on science, bet on management.”
- Valeant Strategy, Investor Presentation, March 30, 2011
§
Cephalon values both and has a proven track record
§
Valeant has mis-characterized Cephalon’s pipeline as
early-stage
“I was extremely disappointed that on Monday you announced an agreement to acquire
another early-stage
R&D program…”
- Michael Pearson, Valeant Chairman & CEO, Letter to Cephalon Board, March 25, 2011
§
The asset Valeant refers to is entering Phase III and is
one of 10 late-stage product candidates
14
Cephalon’s Proven Track Record
15
15
A History Of Strong Sales Growth
*2011 estimates depict the midpoint of guidance ranges provided in press release issued 2/10/11.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Oncology
Other
Pain
CNS
Sales CAGR:
30%
16
16
Focus on Cash Flow Generation
* Excludes $425 million paid in 2008 in association with the settlement agreement with the U.S. Attorney’s Office that was considered a reduction in net cash provided
by operating activities.
** Excludes $100 million paid to Angioblast for a license associated with the Mesoblast transaction that was included as an expense in 2010.
$0
$200
$400
$600
$800
$1,000
17
Ability to Identify, Develop and
Commercialize Assets
|
Asset
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Acquisition Cost
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Cumulative Sales
Through 4Q 2010
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Cephalon Launch
Year
|
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Lafon (PROVIGIL/NUVIGIL)
|
$448
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$7,587
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1998
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GABITRIL
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$110
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$586
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2000
|
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Anesta (ACTIQ)
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$357
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$2,865
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2000
|
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TRISENOX
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$70
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$129
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2005
|
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CIMA (FENTORA & other)
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$483
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$872
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2006
|
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Zeneus
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$366
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$594
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2006
|
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VIVITROL
|
$270
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$33
|
2006 to 2008
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AMRIX
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$99
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$306
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2007
|
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Salmedix (TREANDA)
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$131
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$690
|
2008
|
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Mepha
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$549
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$258
|
2010
|
|
Total
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$2,882
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$13,920
|
|
Note: All figures in $ millions.
18
Our Pipeline Presents Substantial
Value
|
Targeted
Launch
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Product
|
Indication
|
Current Status
|
Estimated
Peak Sales
|
|
2012
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Tamper Deterrent Hydrocodone
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Chronic pain
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Phase III
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$500
|
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2012
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TREANDA
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1
st
line iNHL
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Phase III
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$600
|
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2012
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OMAPRO*
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3
rd
line CML
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Preparing NDA
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$150
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2013
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NUVIGIL
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Bipolar depression
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Phase III
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$1,000
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2013
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Mesenchymal Precursor Cells
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Cord blood expansion
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Phase II completed
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$200
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2014
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CINQUIL
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Eosinophilic asthma
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Phase III
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$1,400
|
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2015
|
CEP-37247
|
Sciatica
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Phase I/II
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$500
|
|
2015
|
REVASCOR
|
Congestive heart failure
|
Phase II
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$2,000
|
|
2015
|
Obatoclax*
|
1
st
line extensive stage -
SCLC
|
Phase II
completed
|
$1,000
|
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2016
|
LUPUZOR
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Systemic lupus
erythematosus
|
Phase II
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$1,000
|
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2016
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Larazotide acetate**
|
Celiac disease
|
Phase II
|
$400
|
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2016
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REVASCOR
|
Acute myocardial infarction
|
Phase II
|
$600
|
Note: All figures in $ millions.
*
Cephalon has announced takeover proposals for ChemGenex and Gemin X. ** Cephalon has an option to purchase assets from Alba Therapeutics.
19
Key Attributes Of Cephalon’s Recent
Acquisitions
1)
Solid, enduring intellectual property
§
Composition of matter patents
§
12 years biologics exclusivity
2)
Unique products that payers will embrace
§
Meet major unmet medical need
§
1
st
or 2
nd
in class products
§
Unique compounds, not reformulations
3)
Can be detailed to specialty physicians utilizing
modest sales forces
4)
Secured worldwide rights for almost every
compound
20
20
Summary
§
30-day average of $56.74 is near our 52-week low and
not
the
appropriate reference point
§
Premium is significantly below precedent life sciences
benchmarks
§
It is based on a “worst-case” scenario
§
It ascribes little-to-no value to Cephalon’s late-stage pipeline
§
It does not reflect the scarcity value of life sciences assets that
“move the needle”
Valeant’s $73 Proposal is Inadequate
21
Supplemental Information
22
22
Cephalon Overview
§
Global biopharmaceutical company with well-
diversified product and geographic mix (170 products
sold in more than 100 countries)
§
Offering of branded, branded generic and generic
products
§
Branded portfolio focused on wakefulness and
neurological disorders, oncology, pain and
inflammatory diseases
§
Proven track record of growth and profitability
§
World-class, late-stage pipeline across multiple
therapeutics areas
§
Continue to augment core platform with business
development opportunities
23
23
Diversified Product Portfolio
CIMA Products
European Proprietary Products
U.S. Proprietary Products
24
24
Cephalon’s Growing Global Presence
Sales in more than 100 countries and over 170 products sold
25
Mesenchymal Precursor Cell (MPC)
Revascor
§
Produce cytokines and/or growth
factors that induce endogenous tissue
repair or cell proliferation
§
Data indicated that MPC treatment reduced
MACE, hospitalization and mortality in CHF
§
Animal studies demonstrated improvement in
ejection fraction in MI
§
Cord blood expansion resulted in 44-fold
volume increases and reduced time to
engraftment
§
In the U.S. alone:
§
6 million people suffer from CHF
§
1 million new cases of MI per year
§
2,000 bone-marrow
transplantations patients could
benefit from MPCs
§
Cord blood expansion program & CHF
to begin phase III programs in early
2012
§
Myocardial infarction to begin phase II
in 2011
Description
Data
Potential
Timeline
26
CINQUIL™
§
Humanized mAb against IL-5
§
Designed to reduce airway eosinophils
§
Phase IIb study results demonstrated:
§
Reduction of sputum eosinophil
counts
§
Improvements on the asthma
control questionnaire, FEV1, FVC,
and clinical asthma exacerbations
§
~30% of severe asthmatics or 750,000
in U.S. alone
§
Phase III eosinophilic asthma program
underway
§
First study readout in 4Q 2012
Description
Data
Potential
Timeline
27
LUPUZOR™
§
Immune modulator believed to:
§
Reduce auto-antigen processing in
antigen-presenting B cells
§
A decrease in the priming and
signaling of auto-reactive T-cells
§
Phase IIb study results showed a
clinically significant improvement in the
intent to treat population as measured
by a composite endpoint as well as the
SLEDAI Score
§
Lupus Foundation of America estimates
1.5 million Americans have a form of
lupus
§
Phase II study underway with interim
analysis 3Q 2011
§
If interim data is positive, phase III will
begin by YE 2011
Description
Data
Potential
Timeline
28
OMAPRO™
§
First-in-class cetaxine (small molecule)
§
Induces apoptosis by inhibition of
protein synthesis
§
Promising data for the treatment of
chronic myeloid leukemia in patients who
failed or are intolerant to Gleevec® and
one other tyrosine kinase inhibitor
§
Presented at ASH 2009, Omapro
demonstrated durable hematologic &
cytogenetic responses (86% CHR, 41%
cytogenetic response)
§
5,000 new CML cases each year in U.S.
§
Increasing prevalence as 5-year survival
rates approach 90%
§
Phase III complete
§
NDA submission H2 2011
Description
Data
Potential
Timeline
Note: Gleevec is a registered trademark of Novartis.
29
Obatoclax
§
Pan Bcl-2 inhibitor with preclinical and
clinical activity
§
Observed as both a single agent and in
combination with standard therapies for
various cancers including extensive
stage small cell lung cancer (ES-SCLC)
§
Completed first line, phase IIb study in
combination with carboplatin and
etoposide in more than 160 patients
with ES-SCLC
§
20,000 new cases per year of ES-
SCLC in U.S. alone
§
End-of-phase II meeting with FDA in
2011
§
Begin phase III program with potential
data readout in early 2015
Description
Data
Potential
Timeline
30
Tamper Deterrent Hydrocodone
§
Polymer-coated particles compressed
into twice-daily, acetaminophen-free
tablets
§
Formulation has demonstrated a
resistance to immediate release of drug
when crushed or mixed with alcohol
§
26 million+ long-acting opioid
prescriptions per year in U.S.
§
$5 billion market
§
Complete Phase III by YE 2011
§
sNDA filing early 2012
Description
Data
Potential
Timeline
31
CEP-37247 (Domain Antibody Anti-TNF)
§
Domain antibody anti-TNF for epidural
injection to treat sciatica
§
TNF is a key cytokine mediator in the
pathophysiology of sciatica
§
Two small studies with etanercept have
demonstrated proof of concept
§
~14% of all chronic lower back pain
cases involve sciatica
§
Prevalent population of ~1.7 million
U.S. sciatica sufferers
§
Phase I/II anti-TNF study in sciatica
underway
§
Data readout 2Q 2012
Description
Data
Potential
Timeline
32
Larazotide Acetate
§
Tight junction modulator
§
Early research suggests larazotide
acetate may help keep the tight
junctions closed when ingested prior to
a meal, thus reducing the inflammatory
process in response to gluten
§
Demonstrated a signal of efficacy in a
phase II study for the treatment of
celiac disease
§
Celiac disease affects > 2 million
patients in U.S. alone
§
No approved treatment
§
In 2011, ALBA will initiate a new
phase II study in patients who are
symptomatic despite a gluten-free diet
§
Phase II interim data readout in 4Q
2012
Description
Data
Potential
Timeline
33
Primary Patents Covering Potential
Launches
|
Product
|
Patent Type
|
Expiration*
|
Market
Exclusivity
|
|
TD Hydrocodone
|
Formulation**
|
2027
|
|
|
TREANDA
|
Composition of matter on polymorph**
|
2015 / 2029
|
NCE exclusivity to 2013
plus 6 months pediatric
extension plus time of
ANDA
|
|
OMAPRO
|
Method of treatment
|
2023
|
|
|
NUVIGIL
|
Composition of matter on polymorph
|
2024
|
|
|
Mesenchymal Precursor Cells
|
Composition of matter
|
2025
|
12-year biologics
exclusivity
|
|
CINQUIL
|
Composition of matter
|
2026
|
12-year biologics
exclusivity
|
|
CEP-37247
|
Composition of matter
|
2027
|
12-year biologics
exclusivity
|
|
REVASCOR
|
Composition of matter
|
2027
|
12-year biologics
exclusivity
|
|
Obatoclax
|
Composition of matter
|
2026
|
|
|
LUPUZOR
|
Composition of matter
|
2026
|
|
|
Larazotide Acetate
|
Composition of matter
|
2023
|
|
*
Hatch-Waxman extension likely on many of these patents.
** Pending.
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