Cephalon Ends Joint Marketing Venture

Cephalon Inc. ended a joint venture for marketing two of its drugs after analysts raised questions about accounting practices involving the partnership in the wake of Enron Corp.’s collapse.

Cephalon shares rose $1.63 to $64.63 in Nasdaq trading.

Cephalon, which makes neurological drugs, formed the joint venture with two outside investors in December 2001 to invest up to $50million to market its Provigil narcolepsy drug and Gabitril treatment for epileptic seizures, the company said.

On Feb. 4, a Sterling Financial Investment Group analyst predicted more regulatory scrutiny of Cephalon “due to the Enron fiasco,” citing a newsletter published by accounting expert Howard Schilit that questioned Cephalon’s accounting for joint ventures. Cephalon’s shares fell 13% that day.

Investors didn’t like the arrangement because it kept some of Cephalon’s expenses off its balance sheet, said Steven Kirsch, senior managing director at Sterling Financial.

To end the joint venture, Cephalon acquired the investors’ interests by issuing $55 million in convertible debt. The notes are convertible into Cephalon’s stock, at the option of the holder, at a price of $70.36.