2.2.0.25falsefalse1010 - Disclosure - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIEStruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010 USD ($) USD ($) / shares $D2010http://www.sec.gov/CIK0000873364duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDPerShareDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0ceph_NatureOfBusinessAndSummaryOfSignificantAccountingPoliciesDisclosureAbstractcephfalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseNATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES3false0ceph_OrganizationConsolidationAndPresentationOfFinancialStatementsCollaborativeArrangementSignificantAccountingPoliciesAndScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlockcephfalsenadurationDescription containing the entire organization, consolidation and basis of presentation of financial statements disclosure....falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <ul> <li style="list-style: none"> Business </li></ul>         Cephalon is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon's strategy is to bring first-in-class and best-in-class medicines to patients in several therapeutic areas, with a particular focus on central nervous system ("CNS") disorders, pain, oncology, inflammatory disease and regenerative medicine. We market numerous branded and generic products around the world. In total, Cephalon sells more than 150 products in nearly 100 countries. <ul> <li style="list-style: none"> Use of Estimates</li></ul>         The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of assets and liabilities. Actual results may differ from those estimates. <ul> <li style="list-style: none"> Principles of Consolidation</li></ul>         The consolidated financial statements include the results of our operations and our wholly-owned subsidiaries and, when applicable, entities for which Cephalon has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated.         For variable interest entities, we assess the terms of our interest in the entity to determine if we are the primary beneficiary. Variable interests are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity's net assets excluding variable interests. The party that consolidates the VIE (the primary beneficiary) is defined as the party with (1) the power to direct activities of the VIE that most significantly affect the VIE's economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We have previously consolidated the following variable interest entities: <ul> <li style="list-style: none"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Acusphere, Inc. (consolidated November 2008; deconsolidated June 2009); </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Ception Therapeutics (consolidated January 2009; acquired noncontrolling interest April 2010); and </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">BioAssets Development Corporation (consolidated November 2009; acquired noncontrolling interest November 2010).</dd></dl></li></ul> For additional details on our recent acquisitions and transactions, see Note 2 herein.         We use the cost method to account for our investments in companies that do not have readily determinable market values which we do not control and for which we do not have the ability to exercise significant influence over operating and financial policies. In accordance with the cost method, these investments are recorded at cost or fair value, as appropriate.         For investments in which we have the ability to exercise significant influence, we utilize the equity method of accounting, unless we have selected the fair value option for that investment, in which case we measure the investment at fair value each period and recognize changes in fair value in earnings as a component of other income (expense). <ul> <li style="list-style: none"> Foreign Currency</li></ul>         We enter into foreign exchange forward contracts and foreign exchange option contracts to protect against foreign currency related fluctuations. Changes in the value of these contracts are recognized within other income (expense), net. Other income (expense), net includes $(7.0) million and $19.0 million of gains (losses) on these foreign exchange contracts for the years ended December 31, 2010 and 2009, respectively. There were no gains (losses) on foreign exchange contracts in 2008. In December 2010, we entered into a foreign exchange forward contract related to our Mesoblast transaction to protect against fluctuations between the Australian Dollar ("A$") and the U.S. Dollar up to a value of A$106.0 million. The contract will mature in February 2011.         For most of our foreign operating entities with currencies other than the U.S. dollar, the local currency is the functional currency. In cases where our foreign entity primarily operates in an economic environment using a currency other than their local currency, the currency in which the entity conducts a majority of its operations is the functional currency. We translate asset and liability balances at exchange rates in effect at the end of the period and income and expense transactions at the average exchange rates in effect during the period. Resulting translation adjustments are reported as a separate component of accumulated other comprehensive income included in stockholders' equity. Gains and losses from foreign currency transactions are included in the consolidated statements of operations. The amount of foreign currency gains (losses) included in our consolidated statement of operations was $(12.2) million, $6.1 million and $7.9 million for the three years ended December 31, 2010, 2009 and 2008, respectively.         Within our Statement of Cash Flows, the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending cash and cash equivalents. All other foreign currency cash flows are reported in the applicable line of the consolidated statement of cash flows using an approximation of the exchange rate in effect at the time of the cash flows. <ul> <li style="list-style: none"> Cash Equivalents and Short-Term Investments </li></ul>         Cash equivalents include investments in liquid securities with original maturities of three months or less from the date of purchase. We consider our short-term investments to be "available-for-sale" and carry them at fair market value. Unrealized gains and losses have been recorded as a separate component of accumulated other comprehensive income included in stockholders' equity. All realized gains and losses on our available-for-sale securities are recognized in results of operations. <ul> <li style="list-style: none"> Significant Products</li></ul>         Our most significant products are our wakefulness products, PROVIGIL® (modafinil) Tablets [C-IV] and NUVIGIL® (armodafinil) Tablets [C-IV] and our oncology product TREANDA®. On a combined basis, our 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")). These products comprised the following for the years ended December 31: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 80%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="20"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="20"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="16"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="16"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="16"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">% of total consolidated net sales </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">% of net sales in U.S. market </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> PROVIGIL net sales</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">41</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">48</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">51</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">94</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">94</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">94</td> <td style="FONT-FAMILY: times">%</td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> NUVIGIL net sales</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">7</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">3</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"></td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"></td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> PROVIGIL and NUVIGIL net sales</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">48</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">51</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">51</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">95</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">94</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">94</td> <td style="FONT-FAMILY: times">%</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> TREANDA net sales</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">14</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">10</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">4</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times">%</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> FENTORA net sales</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">7</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">7</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">8</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">88</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">97</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">100</td> <td style="FONT-FAMILY: times">%</td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> ACTIQ net sales (including generic OTFC)</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">6</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">10</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">14</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">61</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">69</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">74</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> FENTORA and ACTIQ net sales (including generic OTFC)</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">13</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">17</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">22</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">75</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">80</td> <td style="FONT-FAMILY: times">%</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">83</td> <td style="FONT-FAMILY: times">%</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> <ul> <li style="list-style: none"> Major U.S. Customers and Concentration of Credit Risk </li></ul>         In the United States, we sell our products primarily to a limited number of pharmaceutical wholesalers without requiring collateral. We periodically assess the financial strength of these customers and establish allowances for anticipated losses, if necessary. <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 80%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left" width="10"></td> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="22"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="22"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="25"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left" colspan="2">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">% of total trade accounts receivable</th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">% of total consolidated gross sales</th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left" colspan="2">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">At December 31, </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">Year Ended December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left" colspan="2">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Major U.S. customers:</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" valign="bottom"> AmerisourceBergen Corporation</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">13</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">14</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">13</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">20</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">20</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">17</td> <td style="FONT-FAMILY: times" valign="bottom">%</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" valign="bottom"> Cardinal Health, Inc. </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">21</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">23</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">18</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">27</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">29</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">28</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" valign="bottom"> McKesson Corporation</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">17</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">16</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">19</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">24</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">26</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">26</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Total</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">51</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">53</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">50</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">71</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">75</td> <td style="FONT-FAMILY: times" valign="bottom">%</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">71</td> <td style="FONT-FAMILY: times" valign="bottom">%</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> <ul> <li style="list-style: none"> Inventory </li></ul>         Inventory is valued using the first-in, first-out (FIFO) method. We expense pre-approval inventory unless we believe it is probable that the inventory will be saleable. We may have capitalized inventory costs associated with marketed products and certain products prior to regulatory approval and product launch, based on management's judgment of probable future commercial use and net realizable value. With respect to capitalization of unapproved product candidates, we seek to produce inventory in preparation for the launch of the product and in amounts sufficient to support forecasted initial market demand. Typically, capitalization of this inventory does not begin until the product candidate is considered to have a high probability of regulatory approval. This may occur when either the product candidate is in Phase III clinical trials or when it is a new formulation or dosage strength of a presently approved product for which we believe there is a high probability of receiving FDA approval. If we are aware of any specific risks or contingencies that are likely to impact the expected regulatory approval process or if there are any specific issues identified during the research process relating to safety, efficacy, manufacturing, marketing or labeling of the product candidate, we would not capitalize the related inventory.         When manufacturing and capitalizing inventory costs of product candidates and at each subsequent balance sheet date, we consider both the expiration dates of the inventory and anticipated future sales once approved. Since expiration dates are impacted by the stage of completion, we seek to avoid product expiration issues by managing the levels of inventory at each stage to optimize the shelf life of the inventory relative to anticipated market demand following launch.         Once we have determined to capitalize inventory for a product candidate that is not yet approved, we will monitor, on a quarterly basis, the status of this candidate within the regulatory approval process. We could be required to expense previously capitalized costs related to pre-approval inventory upon a change in our judgment of future commercial use and net realizable value, due to a denial or delay of approval by regulatory bodies, a delay in the timeline for commercialization or other potential factors.         On a quarterly basis, we evaluate all inventory, including inventory that may be capitalized for which regulatory approval has not yet been obtained, to determine if any lower of cost or market adjustment is required. As it relates to pre-approval inventory, we consider several factors including expected timing of FDA approval, projected sales volume and estimated selling price. Projected sales volume is based on several factors including market research, sales of similar products and competition in the market. Estimated sales price is based on the price of existing products sold for the same indications and expected market demand. See Note 9 herein. <ul> <li style="list-style: none"> Property and Equipment</li></ul>         Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to 40 years. Property and equipment under capital leases and leasehold improvements are depreciated or amortized over the shorter of the lease term or the expected useful life of the assets. Expenditures for maintenance and repairs are charged to expense as incurred, while major renewals and betterments are capitalized. See Note 10 herein.         We capitalize interest in connection with the construction of plant and equipment. <ul> <li style="list-style: none"> Goodwill, Intangible Assets and Other Long-Lived Assets </li></ul>         Goodwill represents the excess of consideration transferred over the fair value of net assets acquired. Goodwill and indefinite lived intangible assets are not amortized; rather, they are subject to a periodic assessment for impairment by applying a fair-value-based test. We perform our annual test of impairment of goodwill as of July 1. We review indefinite lived intangible assets for impairment on an annual basis and review all intangible assets for impairment whenever changes in circumstances indicate the carrying value of the asset may not be recoverable. If impairment is indicated, we measure the amount of such impairment by comparing the carrying value to the fair value of the assets, which is usually based on the present value of the expected future cash flows associated with the use of the asset. See Notes 11 and 12 herein. <ul> <li style="list-style: none"> Revenue Recognition</li></ul>         In the United States, we sell our proprietary products to pharmaceutical wholesalers, the largest three of which account for 71% of our total consolidated gross sales for the year ended December 31, 2010. Decisions made by these wholesalers regarding the levels of inventory they hold (and thus the amount of product they purchase from us) can materially affect the level of our sales in any particular period and thus may not correlate to the number of prescriptions written for our products as reported by IMS Health Incorporated.         We have distribution service agreements with each of our wholesaler customers. These agreements obligate the wholesalers to provide us with periodic outbound sales information and current inventory levels for our products held at their warehouse locations; additionally, the wholesalers have agreed to manage the variability of their purchases and inventory levels within specified days on hand limits. As of December 31, 2010, we received information from substantially all of our U.S. wholesaler customers about the levels of inventory they held for our U.S. branded products. Based on this information, which we have not independently verified, we believe that total inventory held at these wholesalers is approximately two to three weeks supply of our U.S. branded products at our current sales levels. As of our most recent retail inventory survey in June 2010, our generic OTFC inventory held at wholesalers and retailers is approximately three months.         We recognize revenue from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Additionally, revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: the delivered item has value to the customer on a standalone basis; there is vendor-specific objective evidence or third-party evidence of the selling price of undelivered items; and delivery of any undelivered item is probable.         In the United States, we sell all commercial products F.O.B. destination. Transfer of ownership and risk of loss for the product pass to the customer at the point that the product is received by the customer. In Europe, product sales are recognized predominantly upon customer receipt of the product except in certain contractual arrangements where different terms may be specified. We record product sales net of estimated reserves for contractual allowances, discounts and returns. Contractual allowances result from sales under contracts with managed care organizations and government agencies.         Other revenue, which includes revenues from collaborative agreements, consists primarily of royalty payments, payments for research and development services, up-front fees and milestone payments. If an arrangement requires the delivery or performance of multiple deliverables or elements under a bundled sale, we determine whether the individual elements represent "separate units of accounting." If the separate elements meet the requirements, we recognize the revenue associated with each element separately and revenue is allocated among elements based on relative fair value. If the elements within a bundled sale are not considered separate units of accounting, the delivery of an individual element is considered not to have occurred if there are undelivered elements that are essential to the functionality. Unearned income is amortized by the straight-line method over the term of the contracts. Also, if contractual obligations related to customer acceptance exist, revenue is not recognized for a product or service unless these obligations are satisfied. Non-refundable up-front fees are deferred and amortized to revenue over the related performance period. We estimate our performance period based on the specific terms of each collaborative agreement. We adjust the performance periods, if appropriate, based upon available facts and circumstances. We recognize periodic payments on a percentage of completion basis over the period that we perform the related activities under the terms of the agreements. Revenue resulting from the achievement of milestone events stipulated in the agreements is recognized when the milestone is achieved. Milestones are based upon the occurrence of a substantive element specified in the contract or as a measure of substantive progress towards completion under the contract. For the years ended December 31, 2010, 2009 and 2008, incurred costs that are reflected in our operating expenses were insignificant in connection with these collaborations.         Payments under co-promotional or managed services agreements are recognized when the products are sold or the promotional activities are performed. The portion of the payments that represents reimbursement of our expenses is recognized as an offset to those expenses in our statement of income.         We recognize revenue on new product launches when sales returns can be reasonably estimated and all other revenue recognition requirements have been met. When determining if returns can be estimated, we consider actual returns of similar products as well as sales returns with similar customers. In cases in which a new product is not an extension of an existing line of product or where we have no history of experience with products in a similar therapeutic category such that we cannot estimate expected returns of the new product, we defer recognition of revenue until the product has sold through the supply chain so that the right of return no longer exists or until we have developed sufficient historical experience to estimate sales returns. In developing estimates for sales returns, we consider inventory levels in the distribution channel, shelf life of the product and expected demand based on market data and prescriptions.         Sales of our generic OTFC product could be subject to retroactive price reductions for units that remain in the pipeline if the price of generic OTFC is reduced, including as a result of another generic entrant into the market, and as a result any estimated impact of such adjustments is recorded at the time revenue is recognized. This estimate of both the potential timing of a generic entrant and the amount of the price reduction are highly subjective. <ul> <li style="list-style: none"> Collaborative Arrangements</li></ul>         We enter into collaborative arrangements with pharmaceutical or biotech companies to develop and produce orally disintegrating tablets ("ODT's") of branded and generic drugs and to develop and improve nominated antibodies supplied by our collaboration partners using our humanization technology. In these arrangements, we earn fees for work performed, license fees, royalties on product sales and/or risk based milestone payments. We also manufacture ODT products under supply agreements. Revenues recognized from product sales are classified as net sales and revenues recognized from fees for services, license fees, royalties and milestone payments are classified as other revenues.         Amounts recognized under collaborative arrangements consisted of the following: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="45"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="45"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="45"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">Year ended December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Net sales</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">28,333</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">32,980</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">34,676</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Other revenues</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">40,878</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">38,482</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">26,686</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Total</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">69,211</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">71,462</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">61,362</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>         We have committed to make potential future "milestone" payments to third parties as part of our in-licensing and development programs primarily in the area of research and development agreements. See Note 18 for additional details. <ul> <li style="list-style: none"> Research and Development</li></ul>         All research and development costs are charged to expense as incurred. <ul> <li style="list-style: none"> Acquired In-Process Research and Development </li></ul>         Acquired in-process research and development ("IPR&D") represents the estimated fair value assigned to research and development projects acquired in a purchase business combination (including the initial consolidation of a variable interest entity) that have not been completed at the date of acquisition and which have no future alternative use. Effective on January 1, 2009, IPR&D acquired in a business combination is recorded as an intangible asset, while IPR&D acquired in an asset acquisition is charged to expense as of the acquisition date. All IPR&D acquired prior to January 1, 2009 is charged to expense as of the acquisition date.         The fair value assigned to IPR&D acquired in a business combination is typically determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue projections used to value IPR&D were, in some cases, reduced based on the probability of developing a new drug, and considered the relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by us and our competitors. The resulting net cash flows from such projects are based on management's estimates of cost of sales, operating expenses and income taxes from such projects. The rates utilized to discount the net cash flows to their present value were based on estimated cost of capital calculations.         If these projects are not successfully developed, the sales and profitability of the combined company may be adversely affected in future periods. Additionally, the value of other acquired intangible assets may become impaired. We believed that the foregoing assumptions used in the IPR&D analysis were reasonable at the time of the acquisition. No assurance can be given, however, that the underlying assumptions used to estimate expected project sales, development costs or profitability or the events associated with such projects, will transpire as estimated. <ul> <li style="list-style: none"> Income Taxes </li></ul>         Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We provide for income taxes at a rate equal to our estimated annual combined federal, state and foreign statutory effective rates and we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Subsequent adjustments to our estimates of our ability to recover the deferred tax assets or other changes in circumstances or estimates could cause our provision for income taxes to vary from period to period, as it has for the current year ended December 31, 2010. <ul> <li style="list-style: none"> Reclassifications</li></ul>         Certain reclassifications of prior year amounts have been made to conform to the current year presentation. These reclassifications have no impact on our total assets, liabilities, stockholders' equity, net income (loss) or cash flows. <ul> <li style="list-style: none"> Recent Accounting Pronouncements</li></ul>         Effective January 1, 2010, we adopted the revised accounting guidance for consolidation of variable interest entities ("VIE"), which replaces the previous quantitative based risk and rewards calculation for determining the primary beneficiary of a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (1) the obligation to absorb losses or (2) the right to receive benefits. The new guidance also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. We adopted the additional disclosure requirements of this new standard effective January 1, 2010. This pronouncement did not have a material impact on our consolidated financial statements.         In October 2009, the FASB issued revised accounting guidance for multiple-deliverable arrangements. The amendment requires that arrangement considerations be allocated at the inception of the arrangement to all deliverables using the relative selling price method and provides for expanded disclosures related to such arrangements. It is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We do not believe adoption will have a significant impact on our consolidated financial statements; however, this guidance may impact the timing of revenue recognition related to certain arrangements.         In March 2010, the FASB issued revised accounting guidance for milestone revenue recognition. The new guidance recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development transactions. It is effective on a prospective basis to milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. We will adopt this guidance beginning with agreements entered into after January 1, 2011. We do not believe adoption will have a significant impact on our consolidated financial statements.         The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, imposes an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. In accordance with guidance issued by the FASB, we will estimate and record the liability for the fee in full upon the first qualifying sale each calendar year and will record a corresponding deferred cost to be amortized to operating expense using a straight-line method of allocation over the remaining calendar year. </td></tr></table> 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business         Cephalon is a globalfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescription containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements, description of collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations under thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. Describes all significant accounting policies of the reporting entity, discloses any changes in an accounting principle, including a change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. Also discloses any change in the method of applying an accounting principle, or any change in an accounting principle required by a new pronouncement in the unusual instance that a new pronouncement does not include specific transition provisions.No authoritative reference available.falsefalseNATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES12NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUnKnownUnKnownUnKnownUnKnownfalsetrue