2.2.0.25falsefalse1020 - Disclosure - ACQUISITIONS AND TRANSACTIONStruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 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_AcquisitionsAndTransactionsDisclosureAbstractcephfalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseACQUISITIONS AND TRANSACTIONS3false0us-gaap_BusinessCombinationDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman',times,serif"> <tr> <td> 2. ACQUISITIONS AND TRANSACTIONS <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Mesoblast Limited</li></ul>         In December, 2010, we entered into a strategic alliance with Mesoblast Limited ("Mesoblast") to develop and commercialize novel adult Mesenchymal Precursor Stem Cell (MPC) therapeutics for degenerative conditions of the cardiovascular and central nervous systems. These conditions include Congestive Heart Failure, Acute Myocardial Infarction, Parkinson's Disease, and Alzheimer's Disease. The alliance also extends to products for augmenting hematopoietic stem cell transplantation in cancer patients.         As part of the development and commercialization agreement, in exchange for exclusive world-wide rights to commercialize specific products based on Mesoblast's proprietary adult stem cell technology platform, we agreed to pay Mesoblast a nonrefundable up front payment of $130 million. In December 2010, we paid $100.0 million, which was expensed as acquired in process research and development expense. On or about February 11, 2011, we will also pay and expense, as acquired in process research and development expense, the remaining $30 million of upfront fees as part of the collaboration agreement as we have received Mesoblast shareholder and regulatory approval for us to purchase additional shares, as agreed to under our share purchase agreement.         Additionally, we made a $133.9 million equity investment in Mesoblast common stock, representing a 12.2% interest in the company, included in non-current assets on our consolidated balance sheet. At the date of acquisition, we believe we exercise significant influence over the company due to contractual agreements in place for us to increase our ownership to 19.99% in early 2011, our Chief Executive Officer holding a voting seat on the Mesoblast Board of Directors and the existence of various revenue arrangements between us and Mesoblast. Therefore, we consider our investment in Mesoblast to be an equity method investment. We have elected to account for our equity method investment under the fair value option. We measured the fair value of our investment at the date of acquisition and prospectively utilizing the company's publicly traded stock price. On the date we acquired the 12.2% interest, Mesoblast's share price was Australian dollar ("A$") A$3.43 and the fair value of our investment was $105.4 million. We recorded the difference between the consideration paid and fair value at the date of acquisition as a change in fair value of investments within other income (expense) on the statement of operations. On December 31, 2010, Mesoblast's share price was A$4.67 and we remeasured the fair value of our investment at $145.9 million. The change in fair value between the date of acquisition and the balance sheet date was also recorded as a change in fair value of investments within other income (expense) on the consolidated statement of operations. We consider Mesoblast a related party.         Shareholder approval occurred on February 9, 2011 and we anticipate receiving an additional 7.8% of Mesoblast shares and making the associated payment of approximately $108 million on or about February 11, 2011.         With respect to each product the Company chooses to commercialize, Mesoblast could receive up to $1.7 billion upon the achievement of certain regulatory milestones. The $1.7 billion of milestone payments is estimated based on the approval of the product for the treatment of ten indications in various territories. Mesoblast will be responsible for the conduct and expenses of certain Phase IIa clinical trials and commercial supply of the products. Cephalon will be responsible for the conduct and expenses of all Phase IIb and III clinical trials and subsequent commercialization of the products. If the products are commercially sold, Mesoblast will retain all manufacturing rights and will receive a percentage of net product sales. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> ChemGenex Pharmaceuticals Limited</li></ul>         In October, 2010, we signed a convertible note subscription agreement with ChemGenex Pharmaceuticals Limited, an Australian-based oncology focused biopharmaceutical company ("ChemGenex"). Under the terms of the agreement, we provided A$15 million to ChemGenex in return for a note that is convertible at A$0.50 per share. This funding will support ChemGenex operations, including clinical activities to complete a planned New Drug Application submission to the U.S. Food and Drug Administration for omacetaxine for the treatment of chronic myelogenous leukemia (CML) patients who have failed two or more tyrosine kinase inhibitor (TKIs). Separately, we also entered into option agreements with two of ChemGenex's major shareholders, Stragen International N.V. and Merck Santé S.A.S. Under those option agreements, we have the right to acquire up to an additional 19.9 percent of ChemGenex's outstanding shares at A$0.70 per share. We have the right to exercise the options before the later of March 31, 2011, and ten business days after receipt of certain clinical trial data and related analyses from ChemGenex (the"Exercise Period"). We have the right to convert the notes to ChemGenex shares at any time.         We have determined that ChemGenex is a variable interest entity; however we are not the primary beneficiary of ChemGenex. Although the Convertible Notes agreement and the Option agreement could result in us absorbing losses up to the amount of our A$15M investment or absorbing future returns up to our ownership interest assuming conversion of the notes and exercise of the option, we do not have the power to direct the activities that most significantly impact the performance of ChemGenex. ChemGenex has the decision making authority and power to control its clinical research and day to day operations. We estimate if the notes were converted and the options were exercised we would have a 28% equity interest in ChemGenex. In addition, there are no other agreements that entitle us to receive additional returns or obligate the Company to absorb additional losses. We have elected to account for the convertible notes under the fair value option. Additionally, the option to purchase the 19.9% of ChemGenex shares is a freestanding derivative and is marked to market each period. The convertible notes and purchase option assets of $9.9 million and $0.9 million, respectively, are recorded at fair value at December 31, 2010 and are included within long-term investments and other current assets on our consolidated balance sheet, respectively. Changes in fair value of both the convertible notes and the purchase option are recorded in change in fair value of investments within other income (expense). <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Mepha GmbH</li></ul>         In April 2010, we acquired all of the issued share capital of Mepha GmbH ("Mepha"), a privately-held, Swiss-based pharmaceutical company, for Swiss Francs ("CHF") 622.5 million plus contractual purchase price adjustments of CHF 26.3 million for a total of CHF 648.8 million (or approximately US$605.4 million) in cash, funded from our available cash on hand. Founded in 1949, Mepha markets branded and non-branded generics as well as specialty products in more than 50 countries. Mepha markets its products in Europe, the Middle East, Africa, South and Central America as well as in Asia. Mepha has approximately 620 full-time employees, 500 of them in Switzerland, and approximately 200 contractors. The acquisition of Mepha allows us to expand our geographic reach and to further diversify our business mix into the generic and branded generic arena. Mepha is included in our European segment.         We applied the acquisition method of accounting to record the business combination. The following table summarizes the estimated fair values of the identified assets and acquired liabilities assumed on April 8, 2010, the acquisition date, as well as the fair value of the noncontrolling interest on the acquisition date: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">April 8, 2010 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Cash and cash equivalents</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">38,818</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"> Accounts receivable</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">72,185</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"> Inventory</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">85,901</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 current assets</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">2,313</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"> Property and equipment, net</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">89,458</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"> Intangible assets</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">311,719</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"> Goodwill</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">212,472</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 assets</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">477</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"> Current portion of long term debt</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">468</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"> Accounts payable</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">15,873</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"> Accrued expenses</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">25,210</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"> Long term debt</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">20,742</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"> Other liabilities</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">41,214</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"> Deferred tax liabilities</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">85,150</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"> Noncontrolling interest</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">38,902</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>         The acquisition accounting is being finalized based on fair values of uncertain tax liabilities. The fair value of inventories acquired included a step-up in the value of inventories of $10.5 million. We recorded nonrecurring amortization of $5.0 million and $5.5 million of the inventory revaluation in cost of sales during the second and third quarters of 2010, respectively. Goodwill is attributable to revenue and operational synergies and is allocated to the European segment. There is no goodwill recognized or deductible for tax purposes. The book value of the accounts receivable approximates their fair value and gross contractual value.         Acquisition costs of $10.3 million were expensed as incurred and are included in our statement of operations for the year ended December 31, 2010 and have been recorded in the European segment.         In accordance with local laws and regulations, we acquired and became the sponsor of a defined benefit pension plan in Switzerland in conjunction with the Mepha acquisition. For more information regarding the defined benefit pension plan, please see Note 15.         Mepha Pharma AG is a partially-owned Mepha subsidiary with primary operations in Switzerland. At April 8, 2010, Mepha had a 33.4% equity interest and a controlling voting interest in Mepha Pharma AG. The noncontrolling interest in Mepha Pharma AG was recorded at fair value as part of the acquisition accounting. The fair value of the noncontrolling interest in Mepha Pharma AG was estimated by applying the discounted cash flows method of the income approach. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The estimate of the fair value of the noncontrolling interest is based on an assumed discount rate of 8.5%, a long term annual earnings growth rate of 3.0%, and assumed adjustments due to the lack of control that market participants would consider when estimating the fair value of the noncontrolling interest in Mepha Pharma AG.         The Mepha noncontrolling interest was a non recurring fair value measurement at the acquisition date. The following table sets forth the classification of the noncontrolling interest within the fair value hierarchy: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 62%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="130%" 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="61"></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="87"></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="86"></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="96"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" nowrap="nowrap" align="left"> <div style="MARGIN-BOTTOM: 0pt; WIDTH: 41pt; BORDER-BOTTOM: #000000 1pt solid">Description </div></th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">April 8, 2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Quoted Prices in Active Markets for Identical Assets (Level 1) </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Significant Other Observable Inputs (Level 2) </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Significant Unobservable Inputs (Level 3)</th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Mepha noncontrolling interest</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">38,902</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"></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"></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">38,902</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>         We entered into foreign exchange forward contracts related to our Mepha transaction to protect against fluctuations between the Swiss Franc and the U.S. Dollar. Changes in the value of these contracts were recognized within other income. All foreign exchange contracts settled in the first half of 2010. Other income (expense), net includes $9.1 million of loss on these foreign exchange contracts for the year ended December 31, 2010.         The amounts of revenue and net loss of Mepha included in our consolidated statements of operations for the year ended December 31, 2010 are as follows: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="73"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">April 8 through December 31, 2010</th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Revenues</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">260,214</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"> Net loss attributable to Cephalon, 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">(9,508</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"> Basic loss per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> $</td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> (0.13</td> <td style="FONT-FAMILY: times" valign="bottom"> )</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Diluted loss per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">(0.12</td> <td style="FONT-FAMILY: times" valign="bottom">)</td></tr></table></div> </div>         Mepha's net loss for the reporting period includes amortization of intangible assets of $22.9 million and $10.5 million in nonrecurring amortization of the revaluation of their inventory to fair value upon acquisition.         The following unaudited pro forma information shows the results of our operations for the years ended December 31, 2010 and 2009 as though the Mepha acquisition had occurred at the beginning of the periods presented: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">Year ended December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Revenues</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">2,908,358</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">2,546,366</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Net income attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">430,093</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">343,367</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Basic income per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"> $</td> <td style="FONT-FAMILY: times" align="right"> 5.72</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"> $</td> <td style="FONT-FAMILY: times" align="right"> 4.75</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Diluted income per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">5.33</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">4.42</td> <td style="FONT-FAMILY: times"> </td></tr></table></div> </div>         The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisition taken place as of the beginning of the periods presented, or the results that may occur in the future. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolidation of the acquisition. Ception Therapeutics, Inc.         In January 2009, we entered into an option agreement (the "Ception Option Agreement") with Ception Therapeutics, Inc., a privately-held company ("Ception"). Under the terms of the Ception Option Agreement, we had the irrevocable option (the "Ception Option") to purchase all of the outstanding capital stock on a fully diluted basis of Ception within a specified period of time. As consideration for the Ception Option, we paid Ception $50.0 million (the "Ception Option Fee") and paid Ception stockholders an aggregate of $50.0 million.         We determined that, because of our rights under the Ception Option Agreement, effective on January 13, 2009, Ception was a variable interest entity for which we were the primary beneficiary. As a result, as of January 13, 2009, we included the financial condition and results of operations of Ception in our consolidated financial statements in the United States segment. Prior to April 5, 2010, we did not have an equity interest in Ception and, therefore, we allocated the Ception losses to noncontrolling interest in the consolidated statement of operations.         The following summarizes the carrying amounts and classification of Ception's assets and liabilities included in our consolidated balance sheet as of December 31, 2009 (as a VIE): <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="88"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">December 31, 2009 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Cash and cash equivalents</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">52,500</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 current assets</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">193</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"> Property and equipment, net</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">348</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"> Goodwill</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">121,918</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"> Intangible assets</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">199,400</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 assets</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">10</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"> Current portion of long-term debt, net</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">3,763</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"> Accounts payable</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">4,064</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"> Accrued expenses</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">5,526</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"> Deferred tax liabilities</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">61,911</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"> Noncontrolling interest</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">188,105</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>         In February 2010, we exercised the Ception Option based on our evaluation of the results of a Phase II clinical trial of Ception's lead compound, CINQUIL (reslizumab) for the treatment of eosinophilic asthma. After completing certain closing conditions, including U.S. antitrust approval, in April 2010, we acquired Ception for $250.0 million. We also advanced $25.0 million in financing to Ception prior to the acquisition, for which the Ception stockholders were not required to (and therefore did not) repay at the closing of the acquisition. In April 2010, Ception distributed the Ception Option Fee to its stockholders immediately prior to the closing of the acquisition. Ception stockholders also could receive (i) additional payments related to clinical and regulatory milestones and (ii) royalties related to net sales of products developed from Ception's program to discover small molecule, orally-active, anti-TNF (tumor necrosis factor) receptor agents.         As a result of acquiring the Ception noncontrolling interest in April 2010, we recognized a reduction of $210.1 million in Cephalon stockholders' equity which reflects the difference between the fair value of all consideration paid and the balance of the noncontrolling interest on that date.         The acquisition of Ception's noncontrolling interest includes a contingent consideration arrangement that may require additional consideration to be paid by the company in the form of milestone payments. It is currently estimated that milestone payments will occur in 2014 and 2015. The range of undiscounted amounts we could be required to pay under our agreement is between zero and $500.0 million. We determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including: <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> <dl compact="compact"> <dt> </dt> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">estimated cash flows projected from the success of unapproved product candidates in the U.S. and Europe; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the probability of success for product candidates including risks associated with uncertainty, achievement and payment of milestone events; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the time and resources needed to complete the development and approval of product candidates; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the life of the potential commercialized products and associated risks of obtaining regulatory approvals in the U.S. and Europe; and </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the risk adjusted discount rate for fair value measurement. </dd></dl></li></ul>         The fair value of the liability for the contingent consideration recognized on the acquisition date of the Ception noncontrolling interest was $96.9 million. The contingent consideration payments have been recorded as a liability and the fair value will be evaluated quarterly or more frequently if circumstances dictate. Changes in the fair value of contingent consideration will be recorded in earnings. The change in fair value that was recognized as an operating expense for the period between April 5 and December 31, 2010 was $6.0 million. At December 31, 2010, the fair value of the liability was $102.9 million.         In April 2010, as a result of the exercise of the Ception Option, we began to integrate Ception into the Cephalon business and initiated restructuring efforts. This restructuring was completed and all payments were made in the second quarter of 2010. Nineteen jobs were eliminated for a total pre-tax cost of $3.2 million in the second quarter of 2010. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> BioAssets Development Corporation</li></ul>         Effective November 2009, we signed an agreement with BioAssets Development Corporation ("BDC") that sets forth our option to acquire BDC. Under the terms of the option agreement, we paid BDC an upfront payment of $30.0 million.         We determined that, because of our rights under the BDC option agreement, effective on November 18, 2009, BDC was a variable interest entity for which we were the primary beneficiary. As a result, as of November 18, 2009, we have included the financial condition and results of operations of BDC in our consolidated financial statements in the United States segment. However, prior to November 2010, we did not have an equity interest in BDC and, therefore, we have allocated the BDC losses to noncontrolling interest in the consolidated statement of operations.         The following summarizes the carrying amounts and classification of BDC's assets and liabilities included in our consolidated balance sheet as of December 31, 2009 (as a VIE): <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="88"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">December 31, 2009 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Cash and cash equivalents</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">9,854</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"> Accounts receivable</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">69</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"> Other current assets</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></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Property and equipment, net</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></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Goodwill</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">20,391</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"> Intangible assets</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">48,000</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"> Accounts payable</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">362</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"> Accrued expenses</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">1,817</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"> Deferred tax liabilities</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">18,171</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"> Noncontrolling interest</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">28,009</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>         In October 2010, we exercised the option to acquire BDC following receipt of interim data from a Phase II placebo-controlled proof-of-concept study evaluating epidural administration of a tumor necrosis factor (TNF) inhibitor for the treatment of sciatica in 45 patients. Upon the closing of the merger in November 2010, we purchased all of the outstanding capital stock of BDC for $12.5 million and paid an additional net working capital adjustment of $3.8 million. BDC shareholders could receive additional payments related to regulatory and sales milestones.         As a result of acquiring the BDC noncontrolling interest in November 2010, we recognized a reduction of $23.0 million in Cephalon stockholder's equity, which reflects the difference between the fair value of all consideration paid and the balance of the noncontrolling interest on that date.         The acquisition of BDC's noncontrolling interest includes a contingent consideration arrangement that may require additional consideration to be paid by the company in the form of milestone payments. It is currently estimated the milestone payments will occur in 2014 and 2022. The range of undiscounted amounts we could be required to pay under our agreement is between zero and $80 million. We determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including: <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> <dl compact="compact"> <dt> </dt> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">estimated cash flows projected from the success of unapproved product candidates in the U.S. and Europe; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the probability of success for product candidates including risks associated with uncertainty, achievement and payment of milestone events; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the time and resources needed to complete the development and approval of product candidates; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the life of the potential commercialized products and associated risks of obtaining regulatory approvals in the U.S. and Europe; and </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">the risk adjusted discount rate for fair value measurement. </dd></dl></li></ul>         The fair value of the liability for the contingent consideration recognized on the acquisition date of the BDC noncontrolling interest was $31.8 million. The contingent consideration payments have been recorded as a liability and the fair value will be evaluated quarterly or more frequently if circumstances dictate. Changes in the fair value of contingent consideration will be recorded in earnings. The change in fair value that was recognized as an operating expense for the period between November 19 and December 31, 2010 was $0.5 million. At December 31, 2010, the fair value of the liability was $32.3 million.         In November 2010, as a result of the exercise of the BDC Option, we began to integrate BDC into the Cephalon business and initiated restructuring efforts. This restructuring was completed and all payments were made in the fourth quarter of 2010. Three jobs were eliminated for a total pre-tax cost of $1.0 million in the fourth quarter of 2010. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> UCB Pharma France</li></ul>         In December 2009, we entered into an agreement with UCB Pharma France under which we acquired all assets related to the development, manufacturing, marketing and sale of VOGALENE® (metopimazine) and VOGALIB® (metopimazine) in France and French Overseas territories for $53.3 million. These products are approved for use in the symptomatic treatment of nausea and vomiting. The injectible solution is approved for the prevention of nausea and vomiting in patients under chemotherapy. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Arana Therapeutics Limited</li></ul>         On February 27, 2009, we announced that we acquired (through our wholly owned subsidiary Cephalon International Holdings, Inc. ("Cephalon International")), approximately 19.8% of the total issued share capital (the "Equity Stake") of Arana Therapeutics Limited, an Australian company listed on the Australian Securities Exchange ("Arana"), for $41.4 million and that we intended to initiate a takeover offer for Arana (through Cephalon International). On March 9, 2009, through Cephalon International, we filed a Bidder's Statement with the Australian Securities and Investments Commission in connection with our takeover offer for Arana. The offer terms consisted of the following: <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> <dl compact="compact"> <dt> </dt> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">Payment of A$1.40 cash for each Arana ordinary share less any dividends paid by Arana; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">Upon Cephalon International's receipt of a relevant interest in 90% of Arana ordinary shares, the offer price would increase by A$0.05 to A$1.45 (the "90% Premium"); and </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"> </dt> <dd style="FONT-FAMILY: times">On March 2, 2009, Arana declared an A$0.05 fully franked special dividend (the "Dividend") per Arana ordinary share payable to all Arana shareholders on record as of March 30, 2009. The effect of the Dividend was to reduce our offer price by A$0.05.</dd></dl></li></ul>         The takeover offer closed on June 29, 2009. Cephalon International's relevant interest in Arana as of that date was 93.1%. Cephalon International exercised a compulsory acquisition to acquire the remaining 6.9% interest in Arana's ordinary shares, which was completed on August 8, 2009. The total funds used to acquire Arana shares was $223.2 million, net of gains on foreign exchange contracts.         Arana is a biopharmaceutical company focused on developing next generation antibody and protein based drugs that will improve the lives of patients with inflammatory diseases and cancer. The company's lead compound, CEPH 37247, is a new generation tumor necrosis factor (TNF) alpha blocker. Arana has a patent portfolio related to anti-TNF alpha antibodies and receives licensing income in connection with certain patents. We acquired Arana in order to expand our technology base. Arana is included in our United States operating segment.         Our initial investment in Arana was recorded as an available for sale investment. On May 27, 2009, we acquired additional shares for $89.8 million which increased our Arana holdings to 50.4% of the outstanding shares. As a result, effective on that date we have included Arana in our consolidated financial statements. The 90% Premium payment is considered contingent consideration and was initially recognized at its estimated fair value of $1.0 million for the shares purchased on May 27, 2009. Upon satisfying the 90% criteria on June 12, 2009, the excess of the actual payments over the recorded liability for the 90% premium of $2.8 million was recorded as a charge to other income (expense), net. The fair value of the noncontrolling interest in Arana as of May 27, 2009 was $104.7 million based on the closing stock price for Arana's shares on that date.         The fair value of our Arana holdings of approximately 19.8% immediately prior to the acquisition on May 27, 2009 was $48.0 million. This investment was remeasured to fair value on the acquisition date with the increase of $6.6 million over the original cost recognized in other income (expense), net. This gain is the result of an increase in the value of the Australian dollar relative to the U.S. dollar, net of changes in the Arana share price. For the year ended December 31, 2009, we have included $14.0 million of revenues and $14.6 million of net losses attributable to Cephalon, Inc. for Arana in our consolidated results.         The following summarizes the carrying amounts and classification of Arana's assets and liabilities included in our consolidated balance sheet as of May 27, 2009: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="51"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Cash and cash equivalents</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">9,606</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Short term investments</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">122,817</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Accounts receivable</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">6,766</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Other current assets</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">2,807</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Property and equipment, net</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">7,465</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Intangible assets</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">125,009</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Accounts payable</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">2,551</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Accrued expenses</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">3,080</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Other liabilities</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">4,258</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Deferred tax liabilities</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">12,043</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Noncontrolling interest</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">104,730</td> <td style="FONT-FAMILY: times"> </td></tr></table></div> </div>         The total purchase price consideration as measured in accordance with acquisition accounting requirements was A$311.2 million based on the fair value of the Arana stock on May 27, 2009. The fair value of Arana's net assets on that date was A$324.1 million, which resulted in a gain of A$12.8 million (or $10.0 million) recognized in other income (expense), net. This gain is primarily the difference between the 90% Premium payment actually made and the assessed probability of making the 90% Premium payment at the acquisition date. The actual price paid for all of Arana's outstanding stock including the 90% Premium was A$322.7 million.         There is no goodwill recognized or deductible for tax purposes. The book value of the accounts receivable approximates their fair value and gross contractual value.         The following unaudited pro forma information presents results as if the acquisition occurred at the beginning of each annual reporting period presented: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">Year ended December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Revenues</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">2,200,870</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">$</td> <td style="FONT-FAMILY: times" align="right">2,006,185</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Net income attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">335,684</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">186,790</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> Basic income per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"> 4.64</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right"> 2.75</td> <td style="FONT-FAMILY: times"> </td></tr> <tr style="HEIGHT: 0px" valign="bottom" bgcolor="white"> <td style="FONT-FAMILY: times"> Diluted income per common share attributable to Cephalon, Inc. </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">4.32</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" align="right">2.45</td> <td style="FONT-FAMILY: times"> </td></tr></table></div> </div>         We entered into foreign exchange forward contracts and a foreign exchange option contract related to our Arana transaction to protect against fluctuations between the Australian Dollar and the U.S. Dollar, up to a value of $144.2 million. Changes in the value of these contracts were recognized within net income. All foreign exchange contracts were settled during the second quarter of 2009. Other income (expense), net includes $19.0 million of gains on these foreign exchange contracts for the nine months ended December 31, 2009. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Acusphere, Inc.</li></ul>         In November 2008, we entered into a license and convertible note transaction with Acusphere, Inc. ("Acusphere"). In connection with the transaction, we received an exclusive worldwide license from Acusphere to all of its intellectual property relating to the development and marketing of celecoxib for all current and future indications. Under the license, we paid Acusphere an upfront fee of $5.0 million and agreed to make a $15.0 million milestone payment, as well as royalties on net sales. In addition, we purchased a $15.0 million senior secured three-year convertible note (the "Acusphere Note") from Acusphere, secured by substantially all the assets of Acusphere. Separately, in March 2008, we purchased license rights for Acusphere's Hydrophobic Drug Delivery Systems (HDDS) technology for use in oncology therapeutics for $10 million.         On June 24, 2009, we exchanged the Acusphere Note and $1.0 million for (i) the elimination of the $15.0 million milestone payment and any future royalty payments associated with the celecoxib license agreement and (ii) the Acusphere patent rights relating to the HDDS technology.         We had previously determined that based on the rights afforded to us under the Acusphere Note, effective on November 3, 2008 Acusphere was a variable interest entity for which we were the primary beneficiary and began including Acusphere in our consolidated financial statements. Effective with the termination of the Acusphere Note, we are no longer considered the primary beneficiary and deconsolidated Acusphere, resulting in a $9.4 million charge to acquired in-process research and development as a result of the elimination of the royalty and milestone payments associated with the celecoxib license agreement.         Effective January 1, 2009 through the deconsolidation of Acusphere on June 24, 2009, we attributed Acusphere's losses to the noncontrolling interest, which increased net income attributable to Cephalon, Inc. by $10.6 million during the year ended December 31, 2009. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> SymBio Pharmaceuticals Limited</li></ul>         In March 2009, we paid $0.8 million to exercise our option pursuant to the Option and Exclusivity Agreement with SymBio Pharmaceuticals Limited ("SymBio"), granting Cephalon an exclusive sublicense to bendamustine hydrochloride in China and Hong Kong and acquired $9.1 million of SymBio common stock. In November 2009, we participated in an additional equity offering by SymBio and acquired $2.2 million of SymBio shares. We also re-valued our existing holdings in SymBio to the per share price in their November 2009 equity offering and recognized a $7.1 million impairment charge. Our investment in SymBio is recorded as a cost basis investment. As of December 31, 2010, we owned 13.3% of SymBio's outstanding common stock. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Co-Promotion Agreement with Takeda</li></ul>         With respect to the marketing of PROVIGIL in the United States, on August 29, 2008, we terminated our co-promotion agreement with Takeda Pharmaceuticals North America, Inc. ("TPNA") effective November 1, 2008. As a result of the termination, we are required under the agreement to make payments to TPNA during the three years following the termination of the agreement (the "Sunset Payments"). The Sunset Payments were calculated based on a percentage of royalties to TPNA during the final twelve months of the agreement. During 2008, we recorded an accrual of $28.2 million representing the present value of the Sunset Payments due to TPNA. Payment of this accrual will occur over the three year period ending December 10, 2011. At December 31, 2010, remaining payments total $3.8 million. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> LUPUZOR License</li></ul>         In November 2008, we entered into an option agreement (the "ImmuPharma Option Agreement") with ImmuPharma PLC ("ImmuPharma") providing us with an option to obtain an exclusive, worldwide license to the investigational medication LUPUZOR for the treatment of systemic lupus erythematosus. Under the terms of the ImmuPharma Option Agreement, we paid ImmuPharma a $15.0 million upfront option payment upon execution, which was expensed as in-process research and development in the consolidated statement of operations. On January 30, 2009, we exercised the option and entered into a Development and Commercialization Agreement with ImmuPharma based on a review of interim results of a Phase IIb study for LUPUZOR. In February 2009, we paid $30.0 million in exchange for the exclusive, worldwide license rights to LUPUZOR and expensed this amount as IPR&D. <ul> <li style="list-style: none"> </li> <li style="LIST-STYLE-TYPE: none"> Equity and Convertible Notes Offering </li></ul>         On May 27, 2009, we issued an aggregate of 5,000,000 shares of common stock, par value $0.01 per share, at a price of $60.00 per share, resulting in net cash proceeds of $288.0 million. Concurrently with the equity offering, we also issued $500.0 million aggregate principal amount of 2.5% convertible senior subordinated notes due on May 1, 2014. See Note 14 herein. </td></tr></table></td></tr></table> 2. ACQUISITIONS AND TRANSACTIONS Mesoblast Limited         In December, 2010, we entered into a strategicfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescription of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 88-16 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph 67-73 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph F4 -Subparagraph e -Appendix F falsefalseACQUISITIONS AND TRANSACTIONS12ACQUISITIONS AND TRANSACTIONSUnKnownUnKnownUnKnownUnKnownfalsetrue