Earnings Edge: Cephalon


With earnings season in full swing, Fast Money is giving you the stories behind the numbers. Today, the focus is on drugmaker Cephalon (CEPH), which is surging on stronger outlook for painkillers.

The maker of sleep disorder drug Provigil reported better-than-expected earnings last month and said sales will be about $420 million compared to its previous forcast of $400-410 million. Frank Baldino Jr., founder and CEO of the company, joins the guys on the Fast Line.

Baldino says Provigil is not just a narcolepsy drug, as many people think. It has an expanded label for other sleep disorders such as obstructive sleep apnea and it is doing so well because thirty million Americans suffer from sleep disorders. He thinks his company is well well-positioned going forward with all of its businesses and he expects the “entire franchice is going to do very well this year.”

In addition to Provigil, Cephalon’s painkiller Fentora is another drug that is gaining momentum for the company. And while it’s unfortunate that so many people suffer from pain, Baldino says, it’s very fortunate there is a product like Fentora which seems to fit a niche in that arena.

There’s always a looming question when it comes to little drug companies that are doing well: are they having any conversations with Big Pharma?

Baldino won’t comment on whether any pharmaceutical companies have approached Cephalon, but he does say his company has strong earnings and strong sales growth – and “those are the things Big Pharma desperately needs.”

He’ll let the viewers draw their own conclusions on what that really means.

Eric Bolling believes Cephalon has something. Apnea is a big problem in this country and the painkiller looks good, he says. Guy Adami says 18x forward earnings is not rich in this space. There’s only a float of 65 million shares and it’s a volatile stock, but Guy likes it anyway.

Questions? Comments? fastmoney@cnbc.com

Trader disclosure:
On May 1, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Bolling Owns (DIS), (NMX), Gold, Silver; Karen Finerman’s Firm Owns (BBI); (ISE), (DVA), Finerman’s Firm Owns S&P Puts, CNBC Is A Service Of NBC Universal And Dow Jones.