By Eric Pierce& Shaun Brown
Staff Writers

Cephalon's planned $100 million offering of convertible exchangeable preferred stock will be a big test of the company's resurrection among investors. CEPH is up 94 percent for the year, fueled by the February launch of Provigil modafinil to treat narcolepsy in the U.S., and anticipation of additional data this year on other indications including excessive daytime sleepiness (EDS) associated with sleep apnea, Alzheimer's, Parkinson's and fatigue associated with multiple sclerosis.

Investor sentiment may be ascertained when the company announces its second quarter results, scheduled for release on Tuesday. Provigil sales were $1.7 million in the first quarter.

Before the blush was on the rose, CEPH had to offer investors a 6 percent royalty on U.S. sales of Provigil to raise $30 million in a February offering of revenue sharing notes. Under the new deal, the preferred will convert into common at a premium to be determined at closing. The deal essentially could allow CEPH to "sell" equity at a higher price (and raise more money) than it could if it sold a plain vanilla follow-on.

Perhaps reflecting the potential dilution, CEPH lost $1.375 on the week to $17.50. Nevertheless, the stock is up 150 percent from the $7 it hit in 1997 after the Peripheral and Central Nervous System Drugs Advisory Committee voted 6-to-3 against recommending approval of Myotrophin IGF-1 to treat amyotrophic lateral sclerosis (see BioCentury, May 9, 1997).

At Friday's close, 5.7 million shares underlie the deal. The company currently has 30 million shares outstanding.