Cephalon Holders Take Flight

Frank Baldino Jr.'s optimism aside, Cephalon's(CEPH Quote) shareholders weren't in a very forgiving mood Thursday.

Though the chairman and CEO of Cephalon says 2007 will be a "growth year" and that his company will enjoy "significant earnings growth in the next several years ahead," investors were concerned with a more immediate matter.

After the close of trading Wednesday, Cephalon said the Food and Drug Administration rejected its proposed treatment for attention deficit hyperactivity disorder, a drug called Sparlon. Cephalon said it will no longer seek approval for the drug.

The rosy forecast wasn't just about the long term, though, because the company also said the FDA's decision won't affect its recently released earnings projection for this year.

Still, holders bailed out on the stock. By late afternoon, Cephalon's shares were down $7.79, or 12.2%, to $56.16. Nearly 12 million shares had traded, or roughly six times the daily average for the past three months.

Wall Street was split on the Sparlon announcement. Two investment banking firms cut their ratings, some analysts said they weren't shocked, and others said Cephalon has enough promising experimental products to help it overcome the rejection.

During a conference call with analysts, Baldino said he was "very disappointed ... and rather surprised" at the government's decision, even though an FDA advisory panel had voted against Sparlon by a 12-1 vote in March. Cephalon wanted the drug prescribed for children ages 6 to 17.