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Cephalon Inc – ‘PREM14A’ on 5/27/11

On:  Friday, 5/27/11, at 1:01pm ET   ·   Accession #:  1193125-11-153014   ·   File #:  0-19119

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/27/11  Cephalon Inc                      PREM14A                1:1.4M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Statement                         HTML   1.27M 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant To Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant ¨

Check the appropriate box:

CEPHALON, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Common Stock, par value $0.01 per share (the “Common Stock”), of Cephalon, Inc.

76,922,047 shares of Common Stock (including 705,863 shares of restricted stock) and 7,029,157 options to purchase Common Stock.

$500 million principal amount of 2.50% Convertible Senior Subordinated Notes due 2014 and $820 million principal amount of 2.00% Convertible Senior Subordinated Notes due June 1, 2015 (the “Convertible Notes”).

The maximum aggregate value was determined for purposes of calculating the filing fee only based upon the sum of (A) 76,922,047 shares of Common Stock (including 705,863 shares of restricted stock) multiplied by $81.50 per share, (B) options to purchase 7,029,157 shares of Common Stock multiplied by $63.24 (which is the weighted average exercise price of $63.24 per share as of April 28, 2011) and (C) approximately $2,083,000,000 to be paid to holders of the Convertible Notes upon conversion of such Convertible Notes in connection with the transaction (assuming all Convertible Notes are converted on August 31, 2011, a period in which the “make whole” provisions in the indentures governing the Convertible Notes are in effect). The calculation of maximum aggregate value does not take into account certain warrants held by Deutsche Bank AG, which will be settled in cash following the merger pursuant to transactions described in this proxy statement. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying .00011610 by the sum calculated in the preceding sentence.

$8,480,499,237.32

$984,585.96

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Preliminary Proxy Statement – Subject to Completion, dated May 27, 2011

Cephalon, Inc.

                    , 2011

Dear Fellow Stockholder:

You are cordially invited to attend a special meeting of stockholders of Cephalon, Inc. (“Cephalon”) to be held on                     , 2011 at our corporate headquarters located at 41 Moores Road, Frazer, PA 19355 at          Eastern Daylight Time.

At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of May 1, 2011, by and among Cephalon, Inc., Teva Pharmaceutical Industries Ltd. (“Teva”) and Teva’s indirect, wholly-owned subsidiary, Copper Acquisition Corp. Under the terms of the merger agreement, Copper Acquisition Corp. will merge with and into Cephalon, with Cephalon continuing as the surviving corporation following the merger. If the merger agreement is adopted and the merger is completed, you will be entitled to receive $81.50 in cash, without interest and less any applicable withholding tax, for each share of Cephalon common stock that you own as of the effective time of the merger.

After careful consideration, our board of directors has unanimously determined that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of, Cephalon and its stockholders. Therefore, our board of directors has unanimously approved the merger agreement and unanimously recommends that you vote “FOR” the adoption of the merger agreement. Our board of directors also unanimously recommends that you vote “FOR” the proposal regarding certain merger-related executive compensation arrangements.

Your vote is very important, regardless of the number of shares you own. We cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of our common stock. The failure of any stockholder to vote on the proposal to adopt the merger agreement will have the same effect as a vote against the adoption of the merger agreement.

Our board of directors considered a number of factors in evaluating the transaction and also consulted with our financial advisors and outside legal counsel. The attached proxy statement contains a detailed discussion of the background of, and reasons for, the merger, as well as the terms of the merger agreement. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement carefully and in its entirety. You may also obtain more information about Cephalon from documents we have filed with the Securities and Exchange Commission.

Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or submit your proxy by telephone or the Internet. If you have Internet access, we encourage you to vote via the Internet. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

On behalf of your board of directors, thank you for your continued support.

Sincerely,

The proxy statement is dated                     , 2011, and is first being mailed to stockholders on or about                     , 2011.

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Preliminary Proxy Statement – Subject to Completion, dated May 27, 2011

Cephalon, Inc.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On                     , 2011

To the Stockholders of Cephalon, Inc.:

A special meeting of stockholders of Cephalon, Inc., a Delaware corporation (“Cephalon”), will be held on 2011, at our corporate headquarters located at 41 Moores Road, Frazer, PA 19355 at          Eastern Daylight Time for the following purposes:

1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of May 1, 2011 (the “Merger Agreement”), by and among Cephalon, Teva Pharmaceutical Industries Ltd., an Israeli corporation (“Teva”), and Copper Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Teva (“Merger Sub”). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement. Pursuant to the terms and subject to the conditions of the Merger Agreement, among other things, (a) Merger Sub will merge with and into Cephalon, with Cephalon being the surviving corporation (the “Merger”), and (b) each outstanding share of Cephalon’s common stock, par value $0.01 per share (other than shares owned by Teva, Merger Sub and shares held by stockholders who have perfected and not withdrawn a demand for statutory appraisal rights, if any), will be converted into the right to receive $81.50 in cash, without interest and less any applicable withholding tax, as more fully described in the accompanying proxy statement.

2. To consider and vote on any proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the Merger Agreement if there are insufficient votes to adopt the Merger Agreement at the time of the special meeting.

3. To approve, by non-binding, advisory vote, certain compensation arrangements for Cephalon’s named executive officers in connection with the Merger.

4. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.

Our board of directors has specified                     , 2011, at the close of business, as the record date for the purpose of determining the stockholders who are entitled to receive notice of, and to vote at, the special meeting. Only stockholders of record at the close of business on the record date are entitled to notice of and to vote at the special meeting.

The adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cephalon’s common stock, and the approval of each of the proposal to adjourn the special meeting and the proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of the holders of a majority of the votes present that are entitled to vote at the special meeting, assuming a quorum is present. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy or submit your proxy by telephone or the Internet prior to the special meeting to ensure that your shares will be represented at the special meeting if you are unable to attend. If you have Internet access, we encourage you to vote via the Internet. If you are a stockholder of record, voting in person at the special meeting will revoke any proxy previously submitted. If you hold your shares through a bank, broker or other custodian, you must obtain a legal proxy from such custodian in order to vote in person at the special meeting. If you fail to return your proxy card or do not submit your proxy by phone or the Internet and you fail to attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the meeting. The failure of any stockholder to vote in person or by proxy on the proposal to adopt the Merger Agreement will have the same effect as a vote against the adoption of the Merger Agreement, but will not affect the outcome of any

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vote regarding the adjournment proposal or the non-binding proposal regarding certain merger-related executive compensation arrangements. If you return a proxy card or attend the special meeting in person but abstain from voting, this will have the effect of a vote against each of the proposals.

Please note that space limitations make it necessary to limit attendance at the special meeting to stockholders as of the record date (or their authorized representatives). If your shares are held by a bank or broker, please bring to the special meeting your statement evidencing your beneficial ownership of common stock. All stockholders should also bring photo identification.

After careful consideration, our board of directors has unanimously determined that the Merger Agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the Merger, are advisable and fair to and in the best interests of Cephalon and Cephalon’s stockholders. Our board of directors has unanimously approved the Merger, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby.

The board of directors unanimously recommends that you vote “FOR” adoption of the Merger Agreement, “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the Merger Agreement if there are insufficient votes at the time of the special meeting to adopt the Merger Agreement and “FOR” the non-binding proposal regarding certain Merger-related executive compensation arrangements.

Your vote is important. Whether or not you plan to attend the special meeting, please complete, sign and date the accompanying proxy card and return it in the enclosed prepaid envelope, or you may submit your proxy by telephone or the Internet by following the instructions printed on your proxy card. If you attend the special meeting, you may revoke your proxy and vote in person if you wish, even if you have previously returned your proxy card.

Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the adoption of the Merger Agreement, “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the Merger Agreement if there are insufficient votes to adopt the Merger Agreement at the time of the special meeting and “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements.

Stockholders of Cephalon who do not vote in favor of the adoption of the Merger Agreement will have the right to seek appraisal of the fair value of their shares if the Merger is completed, but only if they submit a written demand for appraisal to Cephalon before the vote is taken on the Merger Agreement and they comply with all requirements of Delaware law, which are summarized in the accompanying proxy statement beginning on page 81 and which are set forth as Annex D to the proxy statement.

By Order of the Board of Directors,

Gerald J. Pappert

Secretary

Frazer, Pennsylvania

                    , 2011

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SUMMARY TERM SHEET

The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. See “Where You Can Find More Information” beginning on page 85. References to “Cephalon,” the “Company,” “we,” “our” or “us” in this proxy statement refer to Cephalon, Inc. and its subsidiaries, and references to “the board,” “the board of directors” or “our board of directors” refer to the board of directors of Cephalon, Inc., unless, in each case, otherwise indicated or the context otherwise requires.

The Parties to the Merger (Page 19)

Cephalon, Inc.

Cephalon, a Delaware corporation, is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon’s strategy is to bring first-in-class and best-in-class medicines to patients in several therapeutic areas, with a particular focus on central nervous system disorders, pain, oncology, inflammatory disease and regenerative medicine. In addition to conducting an active research and development program, Cephalon markets numerous branded and generic products around the world. In total, Cephalon sells more than 180 products in more than 100 countries. Consistent with its core therapeutic areas, Cephalon has aligned its approximately 745 person U.S. field sales and sales management teams by area. It has a sales and marketing organization numbering approximately 640 persons that supports its presence throughout Europe, the Middle East and Africa. Cephalon’s common stock is listed on the NASDAQ Global Select Market under the symbol “CEPH.”

Teva Pharmaceutical Industries Ltd.

Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA), an Israeli corporation, is a leading global pharmaceutical company that develops, produces and markets affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva is the world’s largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries. Teva’s branded businesses focus on neurological, respiratory and women’s health therapeutic areas as well as biologics. Teva’s leading innovative product, Copaxone^®, is the number one prescribed treatment for multiple sclerosis. Teva employs approximately 40,000 people around the world and reached $16.1 billion in net sales in 2010.

Copper Acquisition Corp.

Copper Acquisition Corp., a Delaware corporation, which we refer to as Merger Sub, is an indirect wholly owned subsidiary of Teva. Merger Sub was formed exclusively for the purpose of effecting the transactions described in this proxy statement.

The Merger (Page 23)

The Agreement and Plan of Merger, dated as of May 1, 2011, which we refer to as the merger agreement, provides that, upon the terms and subject to the conditions set forth in the merger agreement, Merger Sub will merge with and into Cephalon, which we refer to as the merger. Cephalon will be the surviving corporation in the merger and will continue to do business as “Cephalon, Inc.” following the merger. In the merger, each outstanding share of Cephalon common stock (other than shares owned by Teva or Merger Sub, shares owned by Cephalon and shares held by stockholders who have properly demanded statutory appraisal rights, if any, which we refer to as dissenting shares) will be converted into the right to receive $81.50 in cash, without interest and less any applicable withholding tax. We sometimes refer to such per share cash amount in this proxy statement as the merger consideration.

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Effects of the Merger (Page 12)

If the merger is completed, you will be entitled to receive $81.50 in cash, without interest and less any applicable withholding taxes, for each share of our common stock owned by you, unless you have perfected your statutory dissenter’s rights of appraisal under Delaware law with respect to the merger. As a result of the merger, Cephalon will cease to be an independent, publicly traded company and will become an indirect wholly owned subsidiary of Teva. You will not own any shares of the surviving corporation following the merger.

Treatment of Options and Other Awards (Page 51)

Cephalon Options. At the effective time of the merger, each option representing the right to acquire shares of our common stock granted under our employee benefit plans outstanding immediately prior to the effective time (whether then vested or unvested) will be cancelled in exchange for the right to receive a cash amount equal to the product of the total number of shares of common stock subject to such option multiplied by an amount equal to the excess, if any, of (a) $81.50 over (b) the exercise price per share under such option, in each case without interest and less any applicable withholding taxes. Options where the exercise price per share is equal to or greater than the $81.50 merger consideration will be cancelled for no value.

Cephalon Restricted Stock. Immediately prior to the effective time of the merger, each share of our common stock subject to a vesting criteria issued pursuant to any of our equity compensation plans will become fully vested and entitled to receive the merger consideration, without interest and less any applicable withholding taxes.

The Special Meeting (Page 20)

Date, Time and Place. The special meeting will be held on              , 2011 at our corporate headquarters located at 41 Moores Road, Frazer, PA 19355 at          Eastern Daylight Time.

Purpose. You will be asked to consider and vote upon (1) the adoption of the merger agreement, pursuant to which Merger Sub will merge with and into Cephalon, (2) the adjournment of the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes to adopt the merger agreement at the time of the meeting, (3) a non-binding proposal regarding certain merger-related executive compensation arrangements and (4) the transaction of such other business as may properly come before the special meeting or any adjournment or postponement thereof.

Record Date and Quorum. You are entitled to vote at the special meeting if you owned shares of our common stock at the close of business on              , 2011, the record date for the special meeting. You will have one vote for each share of our common stock that you owned on the record date. As of the record date, there were          shares of our common stock issued and outstanding and entitled to vote. A majority of the shares of our common stock issued, outstanding and entitled to vote at the special meeting present in person or by proxy constitutes a quorum for the purpose of considering the proposals.

Vote Required. The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Approval of any proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies and the non-binding proposal regarding certain merger-related executive compensation arrangements each require the affirmative vote of the holders of a majority of the votes present that are entitled to vote at the special meeting, assuming a quorum is present.

Common Stock Ownership of Directors and Executive Officers. As of             , 2011, the directors and executive officers of Cephalon held in the aggregate approximately     % of the shares of our common stock entitled to vote at the special meeting. Cephalon expects that its directors and executive officers will vote their shares of common stock “FOR” the adoption of the merger agreement and the other proposals to be considered at the special meeting.

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Voting and Proxies. Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, the Internet, by returning the enclosed proxy card by mail, or by voting in person by appearing at the special meeting. If your shares of our common stock are held in “street name” by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote such shares of common stock using the instructions provided by your broker. If you do not provide your broker, bank or other nominee with instructions, your shares of our common stock will not be voted, which will have the same effect as a vote “AGAINST” the adoption of the merger agreement, but will not impact the vote on the other proposals. The persons named in the accompanying proxy will also have discretionary authority to vote on any adjournments or postponements of the special meeting.

Revocability of Proxy. Any stockholder of record who executes and returns a proxy card (or submits a proxy via telephone or the Internet) may revoke the proxy at any time before it is voted at the special meeting in any one of the following ways:

Recommendation of Our Board of Directors (Pages 30, 75 and 76)

The board of directors unanimously (i) determined that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Cephalon and its stockholders, (ii) approved the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, and (iii) resolved to recommend that the stockholders adopt the merger agreement, and directed that such matter be submitted for consideration of the stockholders of Cephalon at the special meeting. The board of directors unanimously recommends that our stockholders vote “FOR” the adoption of the merger agreement, “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies and “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements.

Interests of Cephalon’s Directors and Executive Officers in the Merger (Page 51)

In considering the recommendation of the board of directors, you should be aware that our directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a stockholder, and that may present actual or potential conflicts of interest. Such interests include (i) severance payments under executive severance agreements entered into between Cephalon and its executive officers and (ii) accelerated vesting of stock options and restricted stock held by Cephalon’s executive officers and stock options held by Cephalon’s directors.

Opinions of Cephalon’s Financial Advisors (Page 34)

Each of Deutsche Bank Securities Inc., which we refer to as Deutsche Bank, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which we refer to as BofA Merrill Lynch, rendered its opinion to the board of directors of Cephalon that, as of May 1, 2011 and based upon and subject to the assumptions, limitations,

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qualifications and conditions set forth in their respective written opinions, the merger consideration of $81.50 in cash per share to be received by the holders of shares of Cephalon common stock in the merger was fair from a financial point of view to such holders.

The full text of the written opinions of Deutsche Bank and BofA Merrill Lynch, both dated May 1, 2011, which set forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with each opinion, are included in this proxy statement as Annex B and Annex C, respectively, and are incorporated herein by reference. The summary of the opinions of Deutsche Bank and BofA Merrill Lynch set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinions. The opinions of Deutsche Bank and BofA Merrill Lynch were addressed to, and for the benefit and use of, the board of directors of Cephalon in connection with its consideration of the merger. Neither Deutsche Bank’s opinion nor BofA Merrill Lynch’s opinion constitutes a recommendation as to how any holder of Cephalon common stock should vote with respect to the merger. Neither Deutsche Bank nor BofA Merrill Lynch expressed any opinion as to the underlying business decision of Cephalon to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies that might have been available to Cephalon.

Cephalon has agreed to pay Deutsche Bank fees, which are currently estimated to be approximately $28 million, for its services as financial advisor to Cephalon, of which $3 million became payable upon the delivery of Deutsche Bank’s opinion (or would have become payable upon Deutsche Bank advising Cephalon that it was unable to render an opinion), $9 million became payable upon the withdrawal by Valeant Pharmaceuticals International, Inc., which we refer to as Valeant, of its proposal to acquire Cephalon and the remainder of which is contingent upon consummation of the merger. Deutsche Bank is an affiliate of Deutsche Bank AG, which, together with its affiliates, we refer to as the DB Group.

In addition, a member of the DB Group and Cephalon are parties to (a) certain convertible note hedge transactions issued by the DB Group and purchased by Cephalon as hedges to the conversion features of the convertible senior subordinated notes issued by Cephalon in 2005 and 2009 and (b) certain warrants issued by Cephalon and purchased by the DB Group. We refer to the convertible note hedge transactions as the hedge transactions, and to the convertible senior subordinated notes as the convertible notes. The hedge transactions and the warrants are call options on Cephalon common stock. The warrants have higher strike prices than the effective strike prices of the hedge transactions. Cephalon expects that the hedge transactions will be exercised, and the warrants will be settled in connection with the merger, in each case in accordance with their terms. Exercise of the hedge transactions will involve payments by the DB Group to Cephalon and settlement of the warrants will involve payments by Cephalon to the DB Group in amounts that are currently undetermined. An example of such payments is provided below.

The DB Group has advised Cephalon that, since the entry into the hedge transactions and the warrants, the DB Group has hedged, and will continue to hedge until their exercise or settlement, respectively, certain risks and exposures (including, among others, equity price risk) under the hedge transactions and the warrants through market transactions (including by purchasing or selling the convertible notes or Cephalon common stock, or entering into or unwinding derivative transactions) and that certain of such hedging activity is designed to make the DB Group indifferent to the exercise value of the warrants and its payment obligations under the hedge transactions.

The terms of the hedge transactions contain contractual limitations on payments related to the time value of the hedge transactions to Cephalon in the case of conversions of the convertible notes prior to their maturity in connection with certain merger events, such as the merger. Because of these contractual limitations, which were designed so Cephalon could achieve certain tax and commercial objectives, the possibility existed that the DB Group could recognize a significant contractual benefit under the terms of the hedge transactions in the event of early conversions of convertible notes and corresponding exercises of the hedge transactions, such as in connection with the merger. The contractual benefit to the DB Group would be the time value of the hedge transactions not fully paid to Cephalon as a result of the contractual limitations described above.

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Assuming market conditions, including stock prices prevailing during the period of Deutsche Bank’s engagement as financial advisor, prior to the execution of the April 15, 2011 letter agreement among Cephalon, Deutsche Bank AG and Deutsche Bank described below, the value of the contractual benefit to the DB Group generally would have decreased as the cash acquisition price for the shares of Cephalon common stock increased (and vice versa). Other market conditions, such as interest rates and volatilities, as well as the time remaining to expiration of the hedge transactions, will also affect the value of the contractual benefit to the DB Group.

To address the matters described in the prior paragraph and in connection with the retention of Deutsche Bank as a financial advisor to Cephalon, Deutsche Bank and Cephalon entered into a letter agreement dated November 4, 2009. This letter agreement provided, among other things, that before Cephalon entered into any definitive agreement providing for a business combination transaction, Cephalon and Deutsche Bank would enter into a mutually acceptable agreement designed to fix the DB Group’s contractual benefit with respect to the exercise of the hedge transactions, such that the DB Group would be indifferent under the hedge transactions to the price paid for the Cephalon common stock in a cash acquisition of Cephalon, such as the merger. In connection with the merger, Deutsche Bank, Deutsche Bank AG and Cephalon entered into a letter agreement dated April 15, 2011 that provided that, in connection with the exercise of the hedge transactions, the DB Group would fix the value of the contractual benefit at $151,800,000. The fixing methodology does not mean that the DB Group will receive $151,800,000 in cash upon exercise of the hedge transactions. Rather, the $151,800,000 value of the contractual benefit will be settled through a cash payment of an amount equal to the difference between $151,800,000 and the actual contractual benefit calculated by the DB Group in connection with the exercise of the hedge transactions in accordance with their terms. Such amount will be payable at the time of exercise of the hedge transactions by Cephalon to the DB Group if the actual contractual benefit calculated by the DB Group is less than $151,800,000 or by the DB Group to Cephalon if the actual contractual benefit calculated by the DB Group exceeds $151,800,000.

Concurrently with the exercise of the hedge transactions, the DB Group will engage in hedging and other market transactions (including purchasing the notes or Cephalon common stock or entering into or unwinding derivative transactions) intended to actually realize these contractual benefits, as well as to manage the hedges of the warrants. However, that hedging activity is at the DB Group’s own risk, and may result in a loss or profit to the DB Group in an amount that may be less than or greater than the expected contractual benefit fixed with Cephalon. This amount will not be known until all of the hedge transactions have been exercised and all of the warrants have been settled in accordance with their terms and the DB Group has completed all of its related hedge unwind activities after closing of the merger.

Separate from the hedge transactions, the terms of the warrants provide for certain cash payments to the DB Group to compensate the DB Group for its losses arising from the cancellation of the warrants in connection with the merger.

To illustrate how the cash payments under these transactions would relate to each other, assuming market conditions as of May 25, 2011, merger consideration of $81.50 per share in cash, closing of the merger on August 31, 2011 and conversion of all of Cephalon’s outstanding convertible notes on August 31, 2011, it is expected that (i) exercises by Cephalon of all outstanding hedge transactions would result in a payment by the DB Group to Cephalon of approximately $738.8 million, (ii) settlement of all outstanding warrants would result in a payment by Cephalon to the DB Group of approximately $603.3 million and (iii) a payment under the April 15, 2011 letter agreement relating to the fixing methodology described above of approximately $14.1 million would be made by Cephalon to the DB Group. Although the foregoing three transactions will be settled separately, these transactions would result in a net payment by the DB Group to Cephalon of approximately $121.4 million. Each of the foregoing amounts will vary depending on the actual closing date of the merger,

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actual conversion date(s) for the convertible notes and market conditions (including interest rates) at the time of the exercises and settlements and may be significantly different from the amounts described above.

Cephalon has agreed to pay BofA Merrill Lynch fees of approximately $21 million for its services as financial advisor to Cephalon, of which of $3 million became payable upon the delivery by BofA Merrill Lynch of its opinion to the board of directors of Cephalon, $4.5 million became payable upon the withdrawal by Valeant of its proposal to acquire Cephalon, and the remainder is contingent upon consummation of the merger.

For a more complete description, see “The Merger —  Opinions of Cephalon’s Financial Advisors”. Also see Annexes B and C to this proxy statement.

Regulatory Approvals (Page 58)

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the rules promulgated thereunder by the Federal Trade Commission, which we refer to as the FTC, the merger may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice, which we refer to as the DOJ, and the applicable waiting period has expired or been terminated. Each of Teva and Cephalon filed on May 13, 2011 notification and report forms under the HSR Act with the FTC and the DOJ. The initial waiting period under the HSR Act will expire at 11:59 p.m. on June 13, 2011, the first business day after the 30th calendar day following the filing, unless the FTC terminates the waiting period prior to that time, or the DOJ or the FTC extends the waiting period by requesting additional information or documentary material relevant to the merger. If the DOJ or the FTC makes such a request, the waiting period will be extended until 11:59 p.m. on the 30th calendar day following the date that the parties certify substantial compliance with such request. Thereafter, the waiting period can be extended only by court order or with the parties’ consent.

Under the Council Regulation 139/2004 of the European Community, as amended, which we refer to as EC Merger Regulation or ECMR, the merger may not be completed until a notification has been filed with and approval has been granted by the European Commission. Teva will file shortly the Form CO notification with the European Commission. The initial review period under the ECMR will expire on the 25th business day following filing with the European Commission, unless Teva needs to offer remedies to address serious doubts raised by the European Commission as a condition for the approval of the merger. If the European Commission expresses such serious doubts and Teva decides to make such an offer during the initial period, the initial review period will expire on the 35th business day following the filing.

In addition, under the merger control rules of jurisdictions outside the United States and the European Union, filings will be required in certain other jurisdictions where the parties conduct their business. We cannot assure you that an antitrust or other regulatory challenge to the merger will not be made. If a challenge is made, we cannot predict the result. The parties are currently in the process of reviewing where merger control filings or approvals may be required or advisable in other foreign jurisdictions. For a more detailed discussion of the requirements regarding regulatory matters under the merger agreement, please see “The Merger — Regulatory Approvals” beginning on page 58 of this proxy statement and “The Merger Agreement — Agreements to Use Reasonable Best Efforts” beginning on page 69 of this proxy statement.

Material United States Federal Income Tax Consequences (Page 56)

The exchange of shares of our common stock for cash pursuant to the merger agreement generally will be a taxable transaction to U.S. holders (as defined below in “The Merger – Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders”) for U.S. federal income tax purposes. U.S. holders who exchange their shares of our common stock in the merger will generally recognize gain or loss in an amount equal to the difference, if any, between the cash received in the merger and their adjusted tax basis in their shares of our common stock. You should consult your own tax advisor for a complete analysis of the federal, state, local and/or foreign tax consequences of the merger to you. See “The Merger — Material U.S. Federal Income Tax Consequences of the Merger to our Stock holders” beginning on page 56.

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Conditions to the Merger (Page 71)

Conditions to Each Party’s Obligations. Each party’s obligation to complete the merger is subject to the satisfaction (or waiver if permissible under applicable law) of the following conditions:

Conditions to Teva’s and Merger Sub’s Obligations. The obligations of Teva and Merger Sub to complete the merger are subject to the satisfaction (or waiver if permissible under applicable law) of the following conditions:

The merger is not conditioned upon the receipt by Teva of financing.

Conditions to Cephalon’s Obligations. The obligation of Cephalon to complete the merger is subject to the satisfaction (or waiver if permissible under applicable law) of the following additional conditions:

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No Solicitation of Other Offers (Page 66)

Subject to certain exceptions, the merger agreement provides that Cephalon and its subsidiaries and their respective directors, officers and employees shall not, and Cephalon shall use its reasonable best efforts to direct and cause its and its subsidiaries’ advisors, attorneys, accountants, consultants, financing sources and other representatives not to, directly or indirectly, solicit, initiate or knowingly encourage or knowingly facilitate any “takeover proposal” (as defined in the merger agreement; see “The Merger Agreement – No Solicitation of Other Offers” on page 66 of this proxy statement ), enter into, or otherwise participate in any discussions or negotiations regarding, or provide any non-public information or data to any person relating to, any takeover proposal, or otherwise propose or publicly announce an intention to take any such action or any other action which would reasonably be expected to lead to, encourage or facilitate a takeover proposal.

Ability to Change Board Recommendation (Page 68)

The merger agreement generally restricts the ability of our board of directors to withhold, withdraw, qualify or modify its recommendation that Cephalon stockholders adopt the merger agreement. However, Cephalon’s board of directors may withdraw, modify or qualify its approval of the merger agreement in a manner adverse to Teva or approve or recommend a takeover proposal made by a third party (or publicly propose to do any of the foregoing), which such actions we refer to as an adverse recommendation change, if it determines in good faith, following consultation with outside counsel, that failure to do so would reasonably be expected to be a violation of its fiduciary duties under applicable law and:

If Cephalon’s board of directors intends to effect an adverse recommendation change following receipt of a superior proposal, it must provide Teva with four business days’ notice of our board of directors’ intent to change its recommendation, negotiate in good faith with Teva during such four business day period and, after taking into account any revised offer by Teva, Cephalon’s board of directors must continue to believe that the takeover proposal constitutes a superior proposal.

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Termination of the Merger Agreement (Page 72)

The merger agreement may be terminated at any time prior to the consummation of the merger, whether before or after stockholder approval has been obtained:

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Termination Fee (Page 73)

If the merger agreement is terminated by Cephalon or by Teva or Merger Sub under the conditions described in further detail below, a termination fee in the amount of $275,000,000, which we refer to as the termination fee, may be payable by Cephalon to Teva.

Cephalon must pay the termination fee to Teva if:

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The merger agreement provides that in no event will we be required to pay the termination fee on more than one occasion. If we pay a termination fee to Teva, such termination fee shall be Teva’s and Merger Sub’s sole and exclusive remedy in circumstances where the termination fee is payable, except where Cephalon has willfully and materially breached its covenants with respect to its obligations regarding the proxy, the stockholder’s meeting or non-solicitation of other transactions, in which case Teva may seek to recover additional damages net of any termination fee payable by Cephalon to Teva.

Appraisal Rights (Page 81)

Under Delaware law, holders of our common stock who follow certain specified procedures and who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares of our common stock as determined by the Delaware Court of Chancery if the merger is completed, but only if they comply with all requirements of Delaware law (including Section 262 of the DGCL, the text of which can be found in Annex D of this proxy statement), which are summarized in this proxy statement. This appraisal amount could be more than, the same as or less than the merger consideration. Any holder of our common stock intending to exercise appraisal rights, among other things, must submit a written demand for an appraisal to us prior to the vote on the adoption of the merger agreement and must not vote or otherwise submit a proxy in favor of adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your ability to seek and obtain appraisal rights.

Market Price of Common Stock (Page 77)

The closing sale price of our common stock on the NASDAQ Global Select Market (“NASDAQ”) on March 29, 2011, the last trading day before Valeant publicly announced its proposal to acquire Cephalon for $73.00 per share in cash, was $58.75. The closing sale price of our common stock on NASDAQ on April 29, 2011, the last trading day prior to the announcement of the merger, was $77.02. On             , 2011, the last trading day before the date of this proxy statement, our common stock closed at $         per share.

Treatment of Outstanding Debt (Page 51)

As of May 25, 2011, Cephalon had outstanding $500 million aggregate principal amount of 2.50% Convertible Senior Subordinated Notes due 2014, which we refer to as the 2.50% Convertible Notes, and $820 million aggregate principal amount of 2.00% Convertible Senior Subordinated Notes due June 1, 2015, which we refer to as the 2.00% Convertible Notes, and which we collectively refer to as the convertible notes. Commencing upon the closing of the merger, holders of the convertible notes will have the option to require us to purchase for cash all or any part of the convertible notes, in accordance with the terms of the convertible notes, at a purchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest, payable in cash.

Additionally, in connection with the merger, the convertible notes will be convertible pursuant to their terms, at the option of the holder, into the right to receive an amount in cash and shares of common stock (which share consideration will be settled following consummation of the merger through the receipt of the applicable cash merger consideration) determined pursuant to the terms of the applicable indenture. In addition, as a result of the merger, (i) the conversion rate of the 2.50% Convertible Notes (currently 14.4928 shares per $1,000 principal amount) will be increased during the applicable conversion period specified in the indenture by a “make whole” premium, calculated in accordance with the indenture governing the 2.50% Convertible Notes, and (ii) a “make whole” premium will be determined for the 2.0% Convertible Notes in accordance with the terms of the applicable indenture as a percentage of their principal amount (resulting in an effective increase in the conversion rate of the 2.0% Convertible Notes (currently 21.4133 shares per $1,000 principal amount)). For illustrative purposes only, if the merger were to be consummated and all Convertible Notes converted on August 31, 2011 following such consummation during the applicable conversion periods, an aggregate of $2.08 billion in cash will be payable to holders of the Convertible Notes.

Fees and Expenses (Page 70)

Whether or not the merger is consummated, all costs and expenses incurred in connection with the merger agreement and the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such expense.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Cephalon stockholder. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully. See “Where You Can Find More Information” beginning on page 85.

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PLEASE DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. YOU WILL RECEIVE DETAILED INSTRUCTIONS CONCERNING EXCHANGE OF YOUR STOCK CERTIFICATES IF THE MERGER IS CONSUMMATED.

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If you return your signed and dated proxy card, but do not mark the boxes showing how you wish to vote, your shares will be voted “FOR” the proposal to adopt the merger agreement, “FOR” the adjournment proposal and “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements. If you do not return your signed and dated proxy card, your shares will not be voted and the effect will be the same as a vote against the adoption of the merger agreement, but will not have an effect on the other proposals at the special meeting, so long as a quorum is otherwise present.

These should each be voted and/or returned separately as described elsewhere in this proxy statement in order to ensure that all of your shares are voted.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement, and the documents to which we refer you in this proxy statement, contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “intends,” “projects,” “estimates” or other words of similar meaning including, without limitation, under the headings “Summary Term Sheet,” “Questions and Answers about the Special Meeting and the Merger,” “The Merger,” “Reasons for the Merger; Recommendation of Our Board of Directors,” “Opinion of Deutsche Bank Securities Inc.,” “Opinion of Merrill Lynch Pierce Fenner & Smith Incorporated,” “Prospective Financial Information,” “Regulatory Approvals,” and “Litigation Related to the Merger.”

Forward-looking statements are based on certain assumptions and expectations of future events. Cephalon cannot guarantee that these assumptions and expectations are accurate or will be realized. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully in documents filed with the Securities and Exchange Commission, which we refer to as the SEC, by Cephalon, particularly under the heading “Risk Factors” in Part 1, Item 1A of Cephalon’s Annual Report on Form 10-K, for the year ended December 31, 2010, Form 10-Q for the quarterly period ended March 31, 2011 and subsequent filings with the SEC, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to:

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Any forward-looking statement made by us in this proxy statement speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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THE PARTIES TO THE MERGER

Cephalon

Cephalon, Inc.

41 Moores Road

P.O. Box 4011

Frazer, Pennsylvania 19355

(610) 344–0200

Cephalon, a Delaware corporation, is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon’s strategy is to bring first-in-class and best-in-class medicines to patients in several therapeutic areas, with a particular focus on central nervous system disorders, pain, oncology, inflammatory disease and regenerative medicine. In addition to conducting an active research and development program, Cephalon markets numerous branded and generic products around the world. In total, Cephalon sells more than 180 products in more than 100 countries. Consistent with its core therapeutic areas, Cephalon has aligned its approximately 745 person U.S. field sales and sales management teams by area. It has a sales and marketing organization numbering approximately 640 persons that supports its presence throughout Europe, the Middle East and Africa. Cephalon’s common stock is listed on the NASDAQ Global Select Market under the symbol “CEPH.”

Teva

Teva Pharmaceutical Industries Ltd.

5 Basel Street, P.O. Box 3190

Petach Tikva 49131 Israel

+972-3-914-8171

Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA), an Israeli corporation, is a leading global pharmaceutical company that develops, produces and markets affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva is the world’s largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries. Teva’s branded businesses focus on neurological, respiratory and women’s health therapeutic areas as well as biologics. Teva’s leading innovative product, Copaxone^®, is the number one prescribed treatment for multiple sclerosis. Teva employs approximately 40,000 people around the world and reached $16.1 billion in net sales in 2010.

Merger Sub

Copper Acquisition Corp.

c/o Teva Pharmaceutical Industries Ltd.

5 Basel Street, P.O. Box 3190

Petach Tikva 49131 Israel

+972-3-914-8171

Copper Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Teva, was formed exclusively for the purpose of effecting the merger.

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THE SPECIAL MEETING

Date, Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on             , 2011 at Cephalon’s corporate headquarters located at 41 Moores Road, Frazer, PA 19355 at            Eastern Daylight Time or at any postponement or adjournment thereof. The purpose of the special meeting is for our stockholders to consider and vote upon adoption of the merger agreement, to consider and vote on any proposal to adjourn the special meeting to a later date, if necessary or appropriate, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes to adopt the merger agreement at the time of the special meeting, to consider and vote upon a non-binding proposal regarding certain merger-related executive compensation arrangements and to transact such other business as may properly come before the special meeting or any adjournment or postponement thereof. Our stockholders must adopt the merger agreement in order for the merger to occur. If our stockholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about             , 2011.

Record Date and Quorum

Cephalon’s board of directors has specified             , 2011, at the close of business, as the record date for the purpose of determining the stockholders who are entitled to receive notice of, and to vote at, the special meeting. Only stockholders of record at the close of business on the record date are entitled to notice of and to vote at the special meeting. On the record date, there were         shares of our common stock outstanding and entitled to vote. Each share of our common stock entitles its holder to one vote on all matters properly coming before the special meeting.

A quorum of the holders of the outstanding shares of our common stock must be present for the special meeting to be held. A quorum is present if the holders of a majority of the outstanding shares of our common stock entitled to vote are present at the meeting, either in person or represented by proxy. Abstentions and broker non-votes are counted as present for the purpose of determining whether a quorum is present. A broker non-vote occurs on an item when a broker is not permitted to vote on that item without instructions from the beneficial owner of the shares and no instructions are given. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.

Securities Held by Directors and Executive Officers

As of             , 2011, the directors and executive officers of Cephalon held and were entitled to vote, in the aggregate,            shares of our common stock, representing approximately     % of the outstanding common stock. Cephalon expects that its directors and executive officers will vote all of their shares of common stock “FOR” the adoption of the merger agreement and the other proposals to be considered at the special meeting.

Proxies and Revocation

If you submit a proxy by telephone or the Internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate. If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the adoption of the merger agreement, “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies and “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements and in accordance with the best judgment of the individuals named in the enclosed proxy card on any other matters properly brought before the special meeting for a vote.

Banks or brokerage firms who hold shares in “street name” for customers may not exercise their voting discretion with respect to the approval of non-routine matters such as the adoption of the merger agreement.

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Therefore, absent specific instructions from the beneficial owner of the shares, banks or brokerage firms are not empowered to vote the shares with respect to the adoption of the merger agreement (i.e., “broker non-votes”). If your shares of Cephalon common stock are held in street name by a bank or brokerage firm, you must obtain a legal proxy from such bank or brokerage firm in order to vote in person at the special meeting. Shares of our common stock held by persons attending the special meeting but not voting, or shares for which we have received proxies with respect to which holders have abstained from voting, will be considered abstentions.

If you participate in the 401(k) plan, the trustee of the 401(k) plan will vote shares of common stock equal to the number of shares of Cephalon common stock equivalent to the interest in Cephalon common stock credited to your account as of the record date according to your instructions. A participant’s allocated 401(k) shares of common stock will not be voted by the trustee if no instructions are received from such participant. Participants in the 401(k) plan have received separate instructions from The Vanguard Group in connection with this proxy statement that provide information on how to vote the participant’s shares of common stock in the 401(k) plan.

Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. You have the right to change or revoke your proxy at any time before the vote taken at the special meeting:

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes to adopt the merger agreement at the time of such adjournment. Our Fourth Amended and Restated Bylaws provide that any adjournment may be made without prior notice if announced at the meeting at which the adjournment is taken and if the adjournment is to a date that is not greater than 30 days after the original date fixed for the special meeting and no new record date is fixed for the adjourned meeting. Any signed proxies received by us prior to             , Eastern Daylight Time, on the date of the special meeting in which no voting instructions are provided on such matter will be voted “FOR” an adjournment of the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes to adopt the merger agreement at the time of such adjournment. Whether or not a quorum exists, holders of a majority of our shares of common stock present in person or represented by proxy and entitled to vote at the special meeting may adjourn the special meeting. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

Solicitation of Proxies

This proxy solicitation is being made and paid for by Cephalon on behalf of its board of directors. In addition, we have retained Innisfree M&A Incorporated to assist in the solicitation. We will pay Innisfree M&A Incorporated approximately a fee of $40,000 plus a fee per phone call and reasonable out-of-pocket expenses for

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its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of our common stock that the brokers and fiduciaries hold of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses. In addition, we will indemnify Innisfree M&A Incorporated against any losses arising out of that firm’s proxy soliciting services on our behalf.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call Innisfree M&A Incorporated, our proxy solicitor, toll-free at (877) 800-5186 (banks and brokers call collect at (212) 750-5833).

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THE MERGER

The Proposal to Adopt the Merger Agreement

On May 1, 2010, Cephalon, Teva and Merger Sub entered into the merger agreement. Cephalon’s board of directors has unanimously determined that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of, Cephalon and its stockholders.

Cephalon stockholders will be asked to consider and vote on a proposal at the special meeting to adopt the merger agreement pursuant to the requirements of Delaware law.

Vote Required for Adoption of the Merger Agreement

Adoption of the merger agreement requires the affirmative vote of a majority of the shares of our common stock outstanding and entitled to vote as of the record date. For the proposal to adopt the merger agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and properly executed broker non-votes, if any, will be counted as present for the purpose of determining whether a quorum is present at the special meeting. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote against the proposal to adopt the merger agreement and the adjournment proposal but will not have any effect on the non-binding proposal regarding certain merger-related executive compensation arrangements. For the reasons described below, our board of directors recommends that you vote “FOR” the adoption of the merger agreement.

Rights of Stockholders Who Object to the Merger

Stockholders are entitled to statutory appraisal rights under Delaware law in connection with the merger. This means that you are entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you receive as a dissenting stockholder in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to Cephalon before the vote is taken on the merger agreement and you must not vote in favor of the adoption of the merger agreement. Your failure to follow exactly the procedures specified under Delaware law will result in the loss of your appraisal rights. See “Dissenters’ Rights of Appraisal” beginning on page 81 of this proxy statement and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex D.

Background of the Merger

In pursuing its objective of enhancing stockholder value, our board of directors has from time to time considered opportunities for a variety of transactions, including potential acquisitions, sales, business combinations and other strategic alliances, including potential transactions with strategic parties, including Teva, and financial sponsors.

On March 3, 2011, Cephalon’s Chief Executive Officer, J. Kevin Buchi, met with Valeant’s Chief Executive Officer, J. Michael Pearson. Mr. Buchi and Mr. Pearson had not met prior to this date. During this meeting Mr. Pearson expressed an interest in a consensual transaction involving Valeant and Cephalon.

On March 18, 2011, Mr. Pearson met with Mr. Buchi. During this meeting, Mr. Pearson delivered to Mr. Buchi a letter addressed to our board of directors that set forth a non-binding proposal, later identified by Valeant on March 25, 2011 as Alternative 1, to acquire Cephalon for $73.00 per share in cash. The letter stated that the proposal was conditioned on confirmatory due diligence and the negotiation of definitive transaction agreements and requested a response by April 1, 2011. Later that day, Mr. Buchi communicated to William P. Egan, the Chairman of our board of directors, that he had received the proposal letter from Valeant and discussed the content of the letter with Mr. Egan.

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On March 19, 2011, representatives from Deutsche Bank and Valeant’s financial advisor, Goldman Sachs & Co., which we refer to as Goldman Sachs, participated in a call to discuss the non-binding proposal for Alternative 1.

On March 21, 2011, our board of directors was provided an update regarding Valeant’s non-binding proposal for Alternative 1 and Valeant’s letter was distributed to the members of our board of directors. Also on this day, members of Cephalon’s management met with representatives of Deutsche Bank and Cephalon’s outside legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to as Skadden, Arps, to discuss the terms of the non-binding proposal for Alternative 1.

On March 24, 2011, Mr. Buchi attended a dinner with William S. Marth, the President and Chief Executive Officer of Teva Pharmaceuticals USA, Inc. to discuss developments in the industry. The dinner had been suggested by a mutual colleague of Mr. Buchi and Mr. Marth, who also attended the dinner. No discussion of a potential transaction involving Cephalon and Teva occurred during this dinner.

On March 25, 2011, our board of directors received a second letter from Valeant confirming its non-binding proposal regarding Alternative 1 and alternatively including a proposal identified as Alternative 2 to acquire certain non-oncology related assets of Cephalon for a total consideration of $2.8 billion in cash. The letter did not specify in detail the specific assets contemplated to be acquired in connection with, or details of the transaction structure contemplated by, Alternative 2. In addition, the letter stated that each of Valeant’s non-binding proposals was conditioned on confirmatory due diligence and the negotiation of definitive transaction agreements. The letter also shortened Valeant’s deadline for Cephalon’s response from April 1, 2011 to March 29, 2011.

On March 26, 2011, a member of Valeant’s board of directors contacted a member of our board of directors to discuss Valeant’s non-binding proposals.

On March 27, 2011, representatives from Deutsche Bank and Goldman Sachs participated in a call to discuss the timeline presented by Valeant in Valeant’s March 25th letter. During this call, pursuant to instructions from Cephalon’s management, representatives from Deutsche Bank stated that our board of directors would be in a position to respond to Valeant by the middle of the week of April 4th.

On March 28, 2011, Cephalon sent a letter to Valeant stating that our board of directors would carefully consider each of Valeant’s non-binding proposals with its financial advisor. The letter noted Valeant’s shortened timeline from April 1st to March 29th and stated that Cephalon would provide Valeant with our board of directors’ response expeditiously following a thorough review of each non-binding proposal.

Also on March 28, 2011, Mr. Buchi called Mr. Pearson to discuss our board of directors’ proposed timeline for reviewing Valeant’s non-binding proposals and representatives of Deutsche Bank called representatives of Goldman Sachs to engage in similar discussions.

On March 29, 2011, members of Cephalon’s management met with representatives of Deutsche Bank and Skadden, Arps to review Valeant’s non-binding proposals.

Also on March 29, 2011, representatives of Deutsche Bank called representatives of Goldman Sachs to discuss certain questions regarding the details of Valeant’s non-binding proposal for Alternative 2. During that call, the representatives of Goldman Sachs stated that Valeant was sending an additional letter to our board of directors. Later that day, our board of directors received a third letter from Valeant in which Valeant declined to extend its March 29th response deadline. Also in this letter, Valeant informed our board of directors that it was considering reducing its original $73.00 per share proposal.

Later that day, Mr. Buchi sent a letter to Mr. Pearson and the Valeant board of directors confirming that our board of directors was reviewing Valeant’s non-binding proposals with its legal and financial advisors and that our board of directors would be in a position to respond to Valeant by the middle of the week of April 4th. After

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sending this letter, Mr. Buchi called Mr. Pearson to clarify our board of directors’ timeline and process. Later that afternoon, Mr. Pearson called Mr. Buchi and informed him that Valeant intended to publicly announce the Valeant takeover proposal later that afternoon.

Following the close of trading on March 29, 2011, Valeant publicly announced in a press release that it had made a proposal to acquire Cephalon for $73.00 per share in cash, which we refer to as the Valeant takeover proposal, and that it intended to commence a consent solicitation to replace our board of directors.

During the evening of March 29, 2011, our board of directors conducted a telephonic meeting to discuss the announcement of the Valeant takeover proposal and Valeant’s proposed consent solicitation. During this meeting, Cephalon’s management and representatives of Deutsche Bank and Skadden, Arps responded to questions regarding the Valeant proposal and Valeant’s proposed consent solicitation. Also during the evening of March 29, 2011, Cephalon issued a press release in which Cephalon confirmed receipt of Valeant’s non-binding proposals and Valeant’s announcement of the Valeant takeover proposal.

On March 30, 2011, during a conference call with Valeant’s investors, Mr. Pearson commented that if Valeant were to perform due diligence on Cephalon, there might be a “little bit more room” for Valeant to increase the price of the Valeant takeover proposal; however, Mr. Pearson also noted that Valeant intended to remain disciplined on price, and did not intend to pursue a transaction with Cephalon at all cost.

Also on March 30, 2011, Mr. Buchi had a telephone conversation with Mr. Marth during which Mr. Buchi agreed to meet with Mr. Marth and Shlomo Yanai, the Chief Executive Officer of Teva, the following week.

On April 1, 2011, our board of directors conducted a telephonic meeting during which our board of directors discussed and approved the retention by Cephalon of BofA Merrill Lynch as an additional financial advisor.

On April 4, 2011, our board of directors met to consider the Valeant takeover proposal. At this meeting, Cephalon’s management and legal and financial advisors reviewed their views of the Valeant takeover proposal with our board of directors. Representatives from Skadden, Arps reviewed with our board of directors the fiduciary duties of our board of directors. Mr. Buchi also updated our board of directors on his meeting with representatives of Teva. Additionally, Cephalon’s management and legal and financial advisors responded to questions relating to the Valeant takeover proposal and Valeant’s proposed consent solicitation. Also at this meeting, our board of directors directed Cephalon’s financial advisors to contact a specified group of strategic parties and financial sponsors to gauge their potential interest in a transaction involving Cephalon.

Following this meeting, on April 4, 2011 and April 5, 2011, Cephalon’s financial advisors contacted 26 strategic parties and five financial sponsors.

During the afternoon of April 5, 2011, our board of directors held a telephonic meeting to continue its consideration of the Valeant takeover proposal. At this meeting, Cephalon’s management and legal and financial advisors responded to questions relating to the Valeant takeover proposal and Valeant’s proposed consent solicitation. Cephalon’s financial advisors also updated our board of directors on the feedback they had received based on their initial calls to strategic parties and financial sponsors and noted that some of the parties that had been approached expressed an interest in exploring an acquisition of the entire company but a larger number of parties had indicated an interest in only acquiring specified assets of Cephalon, rather than the entire Company. Cephalon’s financial advisors also reviewed and confirmed certain financial considerations that had been discussed at the board’s April 4, 2011 meeting. Also at this meeting, Cephalon’s board of directors set April 8, 2011 as the record date for Valeant’s proposed consent solicitation. At the conclusion of this meeting, our board of directors unanimously concluded, after discussion with its financial and legal advisors, that the Valeant takeover proposal was inadequate and not in the best interests of Cephalon’s stockholders.

Following this meeting, on April 5, 2011, Cephalon sent a letter to Valeant and issued a press release setting forth our board of directors’ conclusion. The letter also noted that Cephalon’s board of directors and management would continue to review, develop and adapt Cephalon’s plan to maximize value for Cephalon’s stockholders.

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On April 7, 2011, Mr. Buchi met with Mr. Marth and Mr. Yanai. During this meeting, Mr. Marth and Mr. Yanai expressed an interest in Cephalon’s business and pipeline and requested the opportunity to meet with Cephalon’s management on a prompt basis to discuss a potential transaction.

Additionally, on April 7, 2011, Mr. Buchi met with representatives of Party A, a pharmaceutical company, regarding its interest in a potential transaction with Cephalon. At this meeting, Mr. Buchi and representatives of Party A agreed to continue to explore the possibility of a transaction between Party A and Cephalon.

Also on April 7, 2011, Mr. Buchi had exploratory discussions with representatives of Party B, a pharmaceutical company. Such discussions did not progress beyond the exploratory stage.

On April 9, 2011, our board of directors held a telephonic meeting to continue its consideration of the Valeant takeover proposal during which it received an update from its advisors on the status of Valeant’s consent solicitation and Cephalon’s financial advisors’ discussions with strategic parties and financial sponsors. Mr. Buchi also updated our board of directors on his initial discussions with representatives of Teva and Party A. At this meeting, our board of directors authorized Cephalon and its legal and financial advisors to continue to engage in discussions with strategic parties and financial sponsors and to, if appropriate, enter into confidentiality agreements and provide due diligence information regarding Cephalon to such persons.

On April 11, 2011, Valeant announced that it had set a May 12, 2011 deadline for the delivery of consents in connection with its proposed consent solicitation to remove and replace Cephalon’s board of directors.

Also on April 11, 2011, Cephalon entered into a confidentiality and standstill agreement with Teva. Cephalon subsequently provided Teva and its representatives with access to an electronic data room, containing due diligence information relating to Cephalon.

Also on April 11, 2011, Cephalon entered into a confidentiality and standstill agreement with Party C, a financial sponsor, and subsequently provided Party C and its representatives with access to the electronic data room.

On April 12, 2011, Cephalon’s management and representatives of Deutsche Bank and BofA Merrill Lynch met via videoconference with representatives of Party C.

On April 13, 2011 and April 14, 2011, Cephalon’s management and representatives of Deutsche Bank and BofA Merrill Lynch met with representatives of Teva and its financial advisor, Credit Suisse Securities (USA) LLC. Also for the remainder of that week and during the following week, representatives of Cephalon and Teva engaged in additional diligence discussion and conference calls.

Also on April 14, 2011, Cephalon entered into confidentiality and standstill agreements with each of Party D, a pharmaceutical company, and Party E, a financial sponsor. Cephalon subsequently provided Party D and its representatives with access to the electronic data room.

During the late afternoon on April 14, 2011, our board of directors held a telephonic meeting during which our board of directors received an update from Cephalon’s management and financial advisors on management’s discussions to date with interested parties, including Teva. Cephalon’s financial advisors reported to our board of directors that Teva’s financial advisor had indicated on behalf of Teva that Teva intended to deliver an indication of interest regarding a potential transaction to Cephalon by April 25, 2011. Following discussion among our board of directors, Cephalon’s management and its legal and financial advisors, our board of directors authorized Cephalon’s management and financial advisors to continue to explore the availability of transactions with third parties, including those involving a sale of Cephalon. Our board of directors also engaged in discussions with its advisors as to whether Valeant should be included as a participant, and the potential impact of any such participation, in the discussions being undertaken by Cephalon’s management and financial advisors with third parties regarding a potential transaction. Also during this meeting, representatives of Skadden, Arps provided our board of directors with an update on the status of Valeant’s proposed consent solicitation.

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On April 15, 2011, Cephalon’s management and representatives of Deutsche Bank and BofA Merrill Lynch met with representatives of Party E.

On April 17, 2011, Cephalon entered into a confidentiality and standstill agreement with Party A and subsequently provided Party A and its representatives with access to the electronic data room.

On April 18, 2011, Cephalon’s management and representatives of Deutsche Bank and BofA Merrill Lynch met with representatives of Party A.

Also on April 18, 2011, April 19, 2011 and April 20, 2011, Cephalon’s management and financial advisors engaged in separate follow-up discussions with representatives of each of Party C and Party E to discuss potential transaction structures, including each of Party C’s and Party E’s willingness to provide financing to Cephalon in lieu of a transaction involving the acquisition of the entire Company.

On April 20, 2011, Cephalon’s management and representatives of BofA Merrill Lynch met with representatives of Party D.

On or about April 20, 2011, Cephalon began mailing a definitive consent revocation statement and consent revocation card to its stockholders in connection with Valeant’s proposed consent solicitation to remove and replace our board of directors. Valeant mailed its consent solicitation materials to Cephalon’s stockholders on or about April 22, 2011.

On April 21, 2011, our board of directors met to consider and discuss potential alternatives to the Valeant takeover proposal, including alternatives which would not include the participation of strategic parties or financial sponsors. During this meeting, Mr. Buchi updated our board of directors on the progress of discussions with Teva and the other strategic parties and financial sponsors. Also during this meeting, representatives of Skadden, Arps provided our board of directors with an update on the status of Valeant’s proposed consent solicitation and reviewed with our board of directors its fiduciary duties. Our board of directors also engaged in discussions with Cephalon’s management and financial and legal advisors regarding if and how to engage Valeant given the progress that Cephalon had made through that time in discussions with Teva.

Also on April 21, 2011, Valeant mailed a letter to Cephalon’s stockholders in which it stated that if it were permitted to perform due diligence, Valeant might “modestly” increase the price of the Valeant takeover proposal, provided the results of such due diligence demonstrated greater value than Valeant believed was supported by Cephalon’s public filings.

On April 25, 2011, Mr. Buchi received a telephone call from Mr. Marth during which Mr. Marth reported that Teva intended to make a proposal to acquire Cephalon for $80.00 per share in cash. Following their conversation, Mr. Marth delivered a letter to Mr. Buchi setting forth a proposal by Teva to acquire Cephalon at a price of $80.00 per share in cash with no financing condition. The letter indicated that Teva was prepared to announce the execution of a definitive merger agreement between Teva and Cephalon prior to the opening of the U.S. market on Monday, May 2, 2011. Mr. Marth also delivered to Mr. Buchi a draft exclusivity agreement providing for a period of exclusive negotiation regarding a potential transaction through the close of business on May 2, 2011.

Also on April 25, 2011, representatives of Party A reported to representatives of BofA Merrill Lynch that Party A was not interested in a transaction involving the entire company and Cephalon entered into confidentiality and standstill agreements with Party F, a pharmaceutical company. Thereafter, Cephalon’s management and representatives of BofA Merrill Lynch met with representatives of Party F.

During the late afternoon on April 25, 2011, our board of directors held a telephonic meeting to receive an update on the progress of discussions with the strategic parties and financial sponsors and to review Teva’s offer and request of exclusivity. During this meeting, our board of directors and Cephalon’s management and financial

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and legal advisors discussed whether Teva’s proposed purchase price of $80.00 per share in cash was sufficient to provide Teva with an exclusive negotiating period. Our board of directors noted, among other things, that any potential transaction with Teva should have a high degree of certainty of closing, including with respect to the actions that Teva would be required to take in order to complete a transaction. Our board of directors also discussed and compared Teva’s proposal to other alternatives available to Cephalon. As part of this discussion, it was noted that Cephalon had entered into confidentiality and standstill agreements with five parties other than Teva and that each of these parties had met with Cephalon’s management and financial advisors. Cephalon’s management also discussed with the board that Cephalon was negotiating the terms of a confidentiality agreement with at least one other party. As part of this discussion, it was noted by Cephalon’s financial advisors that Teva had requested more meetings and had spent significantly more time reviewing material in Cephalon’s electronic data room than any other interested party. Following discussion regarding Teva’s proposal, including the proposed price and other terms, our board of directors directed Cephalon’s management to seek a higher price from Teva and to communicate to Teva our board of directors’ views regarding deal certainty. Our board of directors then engaged in additional discussions with Cephalon’s management and financial and legal advisors regarding the consequences of providing exclusivity to Teva, including the impact it could have on discussions with other interested parties and the parameters of what might be acceptable terms in any exclusivity agreement with Teva.

Following this meeting, Mr. Buchi telephoned Mr. Marth and reported to Mr. Marth our board of directors’ views, including that Cephalon’s ability to enter into exclusive negotiations with Teva would be conditioned on Teva raising its proposed purchase price and agreeing that the definitive merger agreement between the parties would contain covenants from Teva that would provide a high degree of certainty of closing to Cephalon. Mr. Buchi also discussed with Mr. Marth that, while Cephalon would consider agreeing to not enter into substantive negotiations regarding a transaction with any other party for a limited period, Cephalon would not agree to limit any such other party’s access to diligence information.

Later that evening, Mr. Marth telephoned Mr. Buchi to report that Teva was prepared to raise its proposed purchase price to $81.00 per share in cash. During this call, Mr. Buchi emphasized the importance to our board of directors of receiving Teva’s best price in exchange for any limited agreement regarding exclusivity. During their conversation, Mr. Marth stated that he believed Teva could raise its proposed purchase price to $81.50 per share in cash, but that he would need to confirm this possibility with Teva’s board of directors. Mr. Buchi encouraged Mr. Marth to confirm that Teva was offering its best price.

Following his discussion with Mr. Marth, Mr. Buchi telephoned Mr. Egan to review Teva’s revised proposal. During this discussion, Mr. Buchi and Mr. Egan concluded, based on the board’s previous discussions, that Teva’s proposed purchase price of $81.50 per share in cash would provide a sufficient basis for Cephalon to agree to negotiate exclusively with Teva until May 2, 2011.

On the morning of April 26, 2011, Mr. Buchi and Mr. Marth spoke via telephone. During their conversation, Mr. Marth confirmed the $81.50 per share price that he had discussed with Mr. Buchi the previous evening and indicated that Teva was unwilling to agree to a higher price.

Following this discussion, Mr. Buchi directed Skadden, Arps to finalize the terms of a limited exclusivity agreement that would provide Teva with the exclusive right to negotiate the terms of a transaction with Cephalon through 9:30 a.m. New York time on May 2, 2011, but that would also permit Cephalon to continue to provide non-public information to third parties that previously had entered into, or that were currently negotiating the terms of a confidentiality agreement with Cephalon. In addition, Mr. Buchi directed Skadden, Arps to deliver a draft merger agreement to Kirkland & Ellis LLP, which we refer to as Kirkland, Teva’s outside legal advisor. Later that day, Skadden, Arps delivered a revised draft exclusivity letter and a draft merger agreement to Kirkland.

Also on April 26, 2011, Mr. Buchi had exploratory discussions with a representative of Party G, a pharmaceutical company.

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On April 27, 2011, representatives of BofA Merrill Lynch participated in a telephone call with representatives of Party H, a pharmaceutical company, to discuss a potential transaction.

During the morning of April 27, 2011, representatives of Skadden, Arps and Kirkland finalized the terms of the exclusivity letter between Teva and Cephalon and Teva and Cephalon executed the limited exclusivity agreement.

Also on April 27, 2011, Kirkland delivered an issues list to Skadden, Arps setting forth key issues identified by Teva in the draft merger agreement, including with respect to the board’s ability to respond to and pursue unsolicited third party takeover proposals, actions that Teva would be required to take in order to cause a merger to be consummated and the amount of the termination fee. Following receipt of the issues list, representatives of Skadden, Arps reviewed the issues list with Cephalon’s management and financial advisors.

On April 28, 2011, representatives of Skadden, Arps and Kirkland met to discuss the merger agreement issues list that previously had been delivered by Kirkland.

Also on April 28, 2011, representatives of Party G reported to Mr. Buchi that Party G did not intend to make an offer to acquire Cephalon.

During the morning of April 29, 2011, Kirkland delivered a revised draft merger agreement to Skadden, Arps generally reflecting the terms of the issues list that had been delivered by Kirkland on April 27^th. Thereafter, Cephalon, Teva and their respective representatives continued to negotiate the terms of the merger agreement, including the size of the proposed termination fee.

On April 30, 2011, Skadden, Arps delivered a revised draft merger agreement to Kirkland reflecting the previous day’s discussions and Cephalon’s positions on open issues.

Additionally, during the morning of April 30, 2011, our board of directors met and reviewed the terms and conditions of the proposed merger. At the meeting, representatives from Skadden, Arps reviewed with our board of directors its fiduciary duties and the current status of the parties’ negotiations regarding the merger agreement. Representatives from Skadden, Arps noted that Cephalon’s management had negotiated provisions intended to provide Cephalon with a significant amount of certainty of closing if the merger agreement were to be executed. Representatives of Deutsche Bank and BofA Merrill Lynch made a presentation with respect to the financial aspects of the $81.50 per share in cash offer by Teva. The directors discussed with Cephalon’s management, financial advisors and legal counsel Teva’s offer, the Valeant takeover proposal, feedback that had been received from other potential bidders and the potential risks associated with the maintenance of Cephalon’s existing strategic plan. During these discussions, our board of directors asked questions of the representatives of Skadden, Arps, Deutsche Bank and BofA Merrill Lynch. Our board of directors also engaged in additional discussions regarding the size of the termination fee that had been requested by Teva and the potential impact that the size of the fee could have on alternative acquirers of Cephalon. The board also reiterated its belief that any transaction agreement with Teva must have a high degree of certainty of closing. Following these discussions, our board of directors directed Cephalon’s management and financial and legal advisors to continue to negotiate the terms of the merger agreement with Teva.

Following the meeting, and throughout the night and morning of May 1, 2011, Cephalon’s and Teva’s legal advisors continued to negotiate the open terms of the draft merger agreement. During these negotiations, Kirkland advised Skadden, Arps that Teva would be willing to agree to a termination fee of $275 million. Kirkland and Skadden, Arps also continued to define the scope of Teva’s reasonable best efforts obligations under the merger agreement.

On May 1, 2011, the Financial Times reported that Mr. Pearson had stated in an interview that Valeant did not intend to participate in any sale process involving Cephalon.

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Later during the afternoon of May 1, 2011, our board of directors met telephonically to review the terms and conditions of the proposed transaction with Teva. At the meeting, representatives from Skadden, Arps reviewed the proposed terms of the latest draft of the merger agreement, which the representatives from Skadden, Arps noted were substantially final, subject to board approval. Representatives from Skadden, Arps also noted that Teva would be prepared to accept a termination fee of $275 million. Our board of directors then discussed the terms of the merger agreement, including the reasonableness of the termination fee. Representatives of Deutsche Bank and BofA Merrill Lynch then reviewed their presentation regarding the financial aspects of Teva’s $81.50 per share in cash offer from the previous day. Following additional discussion by our board of directors, representatives of Deutsche Bank and BofA Merrill Lynch rendered to our board of directors their respective oral opinions, which were subsequently confirmed by delivery of written opinions, each dated May 1, 2011, to the effect that, as of such date, and based upon and subject to the assumptions, limitations, qualifications and conditions described in the opinions, the merger consideration to be received by holders of Cephalon common stock was fair, from a financial point of view, to such holders. These opinions were addressed to, and for the use and benefit of, the board of directors of Cephalon in connection with and for purposes of its evaluation of the merger and do not constitute a recommendation as to how any holder of Cephalon common stock should vote with respect to the merger. Such opinions are attached to this proxy statement as Annex B and Annex C, respectively and each is incorporated herein by reference.

Our board of directors, with the advice and assistance of its financial advisors and outside legal counsel and Cephalon’s management, carefully evaluated the merger agreement and the transactions contemplated thereby, and unanimously determined that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of Cephalon and its stockholders.

The parties executed the merger agreement on May 1, 2011 and issued a joint press release announcing the transaction prior to the open of the U.S. financial markets on May 2, 2011.

Following the issuance of the joint press release on May 2, 2011, Valeant announced in a press release that it had withdrawn its consent solicitation to remove and replace our board of directors and that Valeant would seek strategies other than an acquisition of Cephalon.

Reasons for the Merger; Recommendation of Our Board of Directors

Our board of directors, acting with the advice and assistance of Cephalon’s management and financial advisors and legal advisors, carefully evaluated the merger agreement and the transactions contemplated thereby. Our board of directors determined that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of Cephalon and its stockholders. At a meeting of our board of directors held on May 1, 2011, our board of directors unanimously resolved to approve the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, and to recommend to the stockholders of Cephalon that they adopt the merger agreement.

In the course of reaching its recommendation, our board of directors consulted with Cephalon’s management and its financial and legal advisors and considered a number of substantive factors, both positive and negative, and potential benefits and detriments of the merger. Our board of directors believed that, taken as a whole, the following factors supported its decision to approve the proposed merger:

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Our board of directors also considered potential risks or negative factors relating to the merger, including the following:

Our board of directors concluded that the potentially negative factors associated with the proposed merger were outweighed by the opportunity for Cephalon’s stockholders to realize a significant premium on the value of their common stock and monetize their investment in Cephalon for the $81.50 per share cash merger consideration. Our board of directors believed that the proposed merger would maximize the immediate value of the stockholders’ shares and eliminate the unavoidable risks and uncertainty affecting the future prospects of Cephalon. Accordingly, our board of directors concluded that the merger agreement, the performance by Cephalon of its obligations thereunder and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Cephalon and its stockholders.

In addition, our board of directors was aware of and considered the interests that our directors and executive officers may have with respect to the merger that differ from, or are in addition to, their interests as stockholders of Cephalon generally, as described in “The Merger — Interests of Cephalon’s Directors and Executive Officers in the Merger” beginning on page 51 of this proxy statement, which our board of directors considered as being neutral in its evaluation of the merger.

The foregoing discussion summarizes the material information and factors considered by our board of directors in its consideration of the proposed merger. Our board of directors collectively reached the unanimous decision to approve the merger agreement and related transactions in light of the factors described above and other factors that each member of our board of directors felt were appropriate. In view of the variety of factors and the quality and amount of information considered, our board of directors did not find it practicable to, and

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did not make specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Individual members of our board of directors may have given different weight to different factors.

Our board of directors recommends that you vote “FOR” the adoption of the merger agreement.

Opinions of Cephalon’s Financial Advisors

Deutsche Bank

At the May 1, 2011 meeting of the board of directors of Cephalon, Deutsche Bank delivered its oral opinion to the board of directors of Cephalon, subsequently confirmed in writing, to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, limitations, qualifications and conditions described in Deutsche Bank’s opinion, the merger consideration of $81.50 in cash per share to be received in the merger by holders of Cephalon common stock was fair, from a financial point of view, to such holders.

The full text of Deutsche Bank’s written opinion, dated May 1, 2011, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Deutsche Bank in connection with the opinion, is included in this proxy statement as Annex B and is incorporated herein by reference. The summary of Deutsche Bank’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. Deutsche Bank’s opinion was addressed to, and for the use and benefit of, the board of directors of Cephalon in connection with and for purposes of its evaluation of the merger. Deutsche Bank’s opinion does not constitute a recommendation as to how any holder of Cephalon common stock should vote with respect to the merger. Deutsche Bank’s opinion was limited to the fairness, from a financial point of view, of the merger consideration to be paid in respect of each share of Cephalon common stock and does not address any other aspect of the merger or the merger agreement. Deutsche Bank was not asked to, and Deutsche Bank’s opinion did not, address the fairness of the merger, or any consideration received in connection therewith, to the holders of any other class of securities, creditors or other constituencies of Cephalon nor did it address the fairness of the contemplated benefits of the transaction. Deutsche Bank expressed no opinion as to the underlying business decision of Cephalon to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies. Also, Deutsche Bank did not express any view or opinion as to the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation payable to or to be received by any of the officers, directors or employees of Cephalon, or any class of such persons, in connection with the merger relative to the merger consideration.

In connection with its opinion, Deutsche Bank reviewed certain publicly available financial and other information concerning Cephalon, and certain internal analyses, financial forecasts and other information relating to Cephalon prepared by management of Cephalon. Deutsche Bank also held discussions with certain senior officers and other representatives and advisors of Cephalon regarding the businesses and prospects of Cephalon. In addition, Deutsche Bank:

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Deutsche Bank did not assume responsibility for independent verification of, and did not independently verify, any information, whether publicly available or furnished to it, concerning Cephalon, including, without limitation, any financial information considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, Deutsche Bank, with the knowledge and permission of the board of directors of Cephalon, assumed and relied upon the accuracy and completeness of all such information. Deutsche Bank did not conduct a physical inspection of any of the properties or assets, and did not prepare or obtain any independent evaluation or appraisal of any of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets or liabilities), of Cephalon, Teva or any of their respective subsidiaries, nor did Deutsche Bank evaluate the solvency or fair value of Cephalon, Teva or the combined company (or the impact of the merger thereon) under any law relating to bankruptcy, insolvency or similar matters. With respect to the financial forecasts made available to Deutsche Bank and used in its analyses, Deutsche Bank assumed, with the knowledge and permission of the board of directors of Cephalon, that such forecasts had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Cephalon as to the matters covered thereby under each of the individual cases included in such forecasts. In rendering its opinion, Deutsche Bank expressed no view as to the reasonableness of such forecasts, the assumptions on which they are based or the probability adjustments reflected in each of the individual cases included in such forecasts. Deutsche Bank’s opinion was necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Deutsche Bank expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion of which it becomes aware after the date of its opinion.

For purposes of rendering its opinion, Deutsche Bank assumed, with the permission of the board of directors of Cephalon, that in all respects material to its analysis, the merger would be consummated in accordance with the terms of the merger agreement, without any material waiver, modification or amendment of any term, condition or agreement. Deutsche Bank also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the merger would be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, no restrictions, terms or conditions would be imposed that would be material to its analysis. Deutsche Bank is not a legal, regulatory, tax or accounting expert and Deutsche Bank relied on the assessments made by Cephalon and its advisors with respect to such issues.

Deutsche Bank’s opinion was approved and authorized for issuance by a Deutsche Bank fairness opinion review committee and is addressed to, and for the use and benefit of, the board of directors of Cephalon in connection with and for the purposes of its evaluation of the merger. Deutsche Bank’s opinion was limited to the fairness of the merger consideration to be paid in respect of each share of Cephalon common stock, from a financial point of view, to the holders of Cephalon common stock as of the date of the opinion. Deutsche Bank’s opinion did not address any other terms of the merger or the merger agreement. Deutsche Bank was not asked to, and its opinion did not, address the fairness of the merger, or any consideration received in connection therewith, to the holders of any other class of securities, creditors or other constituencies of Cephalon, nor does it address the fairness of the contemplated benefits of the merger. Following the public disclosure by Valeant of its non-binding proposal to acquire 100% of the outstanding shares of Cephalon common stock, Deutsche Bank solicited, at Cephalon’s direction, indications of interest and definitive proposals from third parties with respect to a possible acquisition of Cephalon. Deutsche Bank expressed no opinion as to the merits of the underlying decision by Cephalon to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies. Deutsche Bank expressed no opinion, and its opinion does not constitute a recommendation, as to how any holder of Cephalon common stock should vote with respect to the merger. In addition, Deutsche Bank did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Cephalon’s officers, directors, or employees, or any class of such persons, in connection with the merger relative to the merger consideration to be received by the holders of Cephalon common stock.

Deutsche Bank has acted as Cephalon’s financial advisor for many years and Cephalon selected Deutsche Bank to continue as its financial advisor in connection with Valeant’s proposal to acquire Cephalon and the

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merger based on Deutsche Bank’s qualifications, expertise, reputation and experience in mergers and acquisitions. Pursuant to an engagement letter between Cephalon and Deutsche Bank, dated November 4, 2009, as amended, Cephalon has agreed to pay Deutsche Bank fees, which are currently estimated to be approximately $28 million, for its services as financial advisor to Cephalon, of which $3 million became payable upon the delivery of Deutsche Bank’s opinion (or would have become payable upon Deutsche Bank advising Cephalon that it was unable to render an opinion), $9 million became payable upon the withdrawal by Valeant of its proposal to acquire Cephalon and the remainder of which is contingent upon consummation of the merger. Cephalon has also agreed to reimburse Deutsche Bank for reasonable fees and disbursements of Deutsche Bank’s counsel and all of Deutsche Bank’s reasonable travel and other out-of-pocket expenses incurred in connection with the merger or otherwise arising out of the retention of Deutsche Bank under the engagement letter. Cephalon has also agreed to indemnify Deutsche Bank and certain related persons to the fullest extent lawful against certain liabilities, including certain liabilities under the federal securities laws arising out of its engagement or the merger.

Deutsche Bank is an internationally recognized investment banking firm experienced in providing advice in connection with mergers and acquisitions and related transactions. Deutsche Bank is an affiliate of Deutsche Bank AG, which, together with its affiliates, is referred to as the DB Group. One or more members of the DB Group have, from time to time, provided investment banking, commercial banking (including extension of credit) and other financial services to Teva or its affiliates for which they have received compensation, but the DB Group has not provided any such services to Teva or its affiliates in the past two years. In addition, one or more members of the DB Group have, from time to time, provided, and are currently providing, investment banking, commercial banking (including extension of credit) and other financial services to Cephalon or its affiliates for which they have received, and in the future may receive, compensation, including acting as financial advisor to Cephalon in connection with its acquisition of Gemin X Pharmaceuticals, Inc. announced in March 2011, as financial advisor to Cephalon in connection with its strategic alliance with, and equity investment in, Mesoblast Limited announced in December 2010, as financial advisor to Cephalon in connection with its acquisition of Mepha AG announced in February 2010, and as book-running managing underwriter with respect to an offering of Cephalon’s 2.50% convertible senior subordinated notes due May 1, 2014 (aggregate principal amount $500 million) and an offering of 5,000,000 shares of Cephalon common stock in May 2009. Cephalon has paid fees to the DB Group of approximately $44.1 million in the aggregate in respect of such services provided by the DB Group unrelated to the merger in the past two years. A member of the DB Group is currently a lender under Cephalon’s $200 million revolving credit facility (aggregate commitment $36 million) and any amounts outstanding thereunder are expected to be repaid prior to, or in connection with, the merger.

In addition, a member of the DB Group and Cephalon are parties to (a) certain convertible note hedge transactions issued by the DB Group and purchased by Cephalon as hedges to the conversion features of the convertible senior subordinated notes issued by Cephalon in 2005 and 2009 and (b) certain warrants issued by Cephalon and purchased by the DB Group. We refer to the convertible note hedge transactions as the hedge transactions, and to the convertible senior subordinated notes as the convertible notes. The hedge transactions and the warrants are call options on Cephalon common stock. The warrants have higher strike prices than the effective strike prices of the hedge transactions. Cephalon expects that the hedge transactions will be exercised, and the warrants will be settled in connection with the merger, in each case in accordance with their terms. Exercise of the hedge transactions will involve payments by the DB Group to Cephalon and settlement of the warrants will involve payments by Cephalon to the DB Group in amounts that are currently undetermined. An example of such payments is provided below.

The DB Group has advised Cephalon that, since the entry into the hedge transactions and the warrants, the DB Group has hedged, and will continue to hedge until their exercise or settlement, respectively, certain risks and exposures (including, among others, equity price risk) under the hedge transactions and the warrants through market transactions (including by purchasing or selling the convertible notes or Cephalon common stock, or entering into or unwinding derivative transactions) and that certain of such hedging activity is designed to make the DB Group indifferent to the exercise value of the warrants and its payment obligations under the hedge transactions.

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The terms of the hedge transactions contain contractual limitations on payments related to the time value of the hedge transactions to Cephalon in the case of conversions of the convertible notes prior to their maturity in connection with certain merger events, such as the merger. Because of these contractual limitations, which were designed so Cephalon could achieve certain tax and commercial objectives, the possibility existed that the DB Group could recognize a significant contractual benefit under the terms of the hedge transactions in the event of early conversions of convertible notes and corresponding exercises of the hedge transactions, such as in connection with the merger. The contractual benefit to the DB Group would be the time value of the hedge transactions not fully paid to Cephalon as a result of the contractual limitations described above. Assuming market conditions, including stock prices prevailing during the period of Deutsche Bank’s engagement as financial advisor, prior to the execution of the April 15, 2011 letter agreement among Cephalon, Deutsche Bank AG and Deutsche Bank described below, the value of the contractual benefit to the DB Group generally would have decreased as the cash acquisition price for the shares of Cephalon common stock increased (and vice versa). Other market conditions, such as interest rates and volatilities, as well as the time remaining to expiration of the hedge transactions, will also affect the value of the contractual benefit to the DB Group.

To address the matters described in the prior paragraph and in connection with the retention of Deutsche Bank as a financial advisor to Cephalon, Deutsche Bank and Cephalon entered into a letter agreement dated November 4, 2009. This letter agreement provided, among other things, that before Cephalon entered into any definitive agreement providing for a business combination transaction, Cephalon and Deutsche Bank would enter into a mutually acceptable agreement designed to fix the DB Group’s contractual benefit with respect to the exercise of the hedge transactions, such that the DB Group would be indifferent under the hedge transactions to the price paid for the Cephalon common stock in a cash acquisition of Cephalon, such as the merger. In connection with the merger, Deutsche Bank, Deutsche Bank AG and Cephalon entered into a letter agreement dated April 15, 2011 that provided that, in connection with the exercise of the hedge transactions, the DB Group would fix the value of the contractual benefit at $151,800,000. The fixing methodology does not mean that the DB Group will receive $151,800,000 in cash upon exercise of the hedge transactions. Rather, the $151,800,000 value of the contractual benefit will be settled through a cash payment of an amount equal to the difference between $151,800,000 and the actual contractual benefit calculated by the DB Group in connection with the exercise of the hedge transactions in accordance with their terms. Such amount will be payable at the time of exercise of the hedge transactions by Cephalon to the DB Group if the actual contractual benefit calculated by the DB Group is less than $151,800,000 or by the DB Group to Cephalon if the actual contractual benefit calculated by the DB Group exceeds $151,800,000.

Concurrently with the exercise of the hedge transactions, the DB Group will engage in hedging and other market transactions (including purchasing the notes or Cephalon common stock or entering into or unwinding derivative transactions) intended to actually realize these contractual benefits, as well as to manage the hedges of the warrants. However, that hedging activity is at the DB Group’s own risk, and may result in a loss or profit to the DB Group in an amount that may be less than or greater than the expected contractual benefit fixed with Cephalon. This amount will not be known until all of the hedge transactions have been exercised and all of the warrants have been settled in accordance with their terms and the DB Group has completed all of its related hedge unwind activities after closing of the merger.

Separate from the hedge transactions, the terms of the warrants provide for certain cash payments to the DB Group to compensate the DB Group for its losses arising from the cancellation of the warrants in connection with the merger.

To illustrate how the cash payments under these transactions would relate to each other, assuming market conditions as of May 25, 2011, merger consideration of $81.50 per share in cash, closing of the merger on August 31, 2011 and conversion of all of Cephalon’s outstanding convertible notes on August 31, 2011, it is

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expected that (i) exercises by Cephalon of all outstanding hedge transactions would result in a payment by the DB Group to Cephalon of approximately $738.8 million, (ii) settlement of all outstanding warrants would result in a payment by Cephalon to the DB Group of approximately $603.3 million and (iii) a payment under the April 15, 2011 letter agreement relating to the fixing methodology described above of approximately $14.1 million would be made by Cephalon to the DB Group. Although the foregoing three transactions will be settled separately, these transactions would result in a net payment by the DB Group to Cephalon of approximately $121.4 million. Each of the foregoing amounts will vary depending on the actual closing date of the merger, actual conversion date(s) for the convertible notes and market conditions (including interest rates) at the time of the exercises and settlements and may be significantly different from the amounts described above.

The DB Group may also provide investment and commercial banking services to Cephalon, Teva and their respective affiliates in the future, for which the DB Group would expect to receive compensation. In the ordinary course of business, members of the DB Group may actively trade in the securities and other instruments and obligations of Cephalon and Teva (or their respective affiliates) for their own accounts and for the accounts of their customers. Accordingly, the DB Group may at any time hold a long or short position in such securities, instruments and obligations.

BofA Merrill Lynch

At the May 1, 2011 meeting of the board of directors of Cephalon, BofA Merrill Lynch delivered its oral opinion to the board of directors of Cephalon, subsequently confirmed in writing, to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, limitations, qualifications and conditions described in BofA Merrill Lynch’s opinion, the merger consideration of $81.50 in cash per share to be received in the merger by holders of Cephalon common stock was fair, from a financial point of view, to such holders.

The full text of BofA Merrill Lynch’s written opinion, dated May 1, 2011, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by BofA Merrill Lynch in connection with the opinion, is included in this proxy statement as Annex C and is incorporated herein by reference. The summary of the BofA Merrill Lynch opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. BofA Merrill Lynch’s opinion was for the benefit and use of the board of directors of Cephalon in connection with and for purposes of its evaluation of the merger. BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, of the consideration to be received by holders of Cephalon common stock and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any other class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration. BofA Merrill Lynch did not express any opinion or view as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Cephalon or in which Cephalon might engage or as to the underlying business decision of Cephalon to proceed with or effect the merger. In addition, BofA Merrill Lynch expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter.

In connection with its opinion, BofA Merrill Lynch:

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In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with BofA Merrill Lynch and relied upon the assurances of the management of Cephalon that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the financial forecasts relating to Cephalon prepared by the management of Cephalon, BofA Merrill Lynch was advised by Cephalon, and assumed, that they had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Cephalon as to the future financial performance of Cephalon under each of the individual cases reflected in such forecasts. In rendering its opinion, BofA Merrill Lynch expressed no view as to the reasonableness of the forecasts, the assumptions on which they were based or the probability adjustments reflected in each of the individual cases included in such forecasts. BofA Merrill Lynch did not make, and was not provided with, any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Cephalon or Teva, nor did BofA Merrill Lynch make any physical inspection of the properties or assets of Cephalon or Teva. BofA Merrill Lynch did not evaluate the solvency or fair value of Cephalon or Teva under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at the direction of Cephalon, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Cephalon or the contemplated benefits of the merger.

BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, of the consideration to be received by holders of Cephalon common stock and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any other class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration. Following the public disclosure by Valeant of its non-binding proposal to acquire 100% of the outstanding shares of Cephalon common stock, BofA Merrill Lynch solicited, at Cephalon’s direction, indications of interest and definitive proposals from third parties with respect to a possible acquisition of Cephalon. BofA Merrill Lynch did not express any opinion or view as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Cephalon or in which Cephalon might engage or as to the underlying business decision of Cephalon to proceed with or effect the merger. BofA Merrill Lynch did not express any opinion as to the prices at which Cephalon common stock would trade at any time, including following announcement of the merger. In addition, BofA Merrill Lynch expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter.

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Cephalon selected BofA Merrill Lynch as its financial advisor in connection with Valeant’s proposal to acquire Cephalon and the merger based on BofA Merrill Lynch’s qualifications, expertise, reputation and experience in mergers and acquisitions. Pursuant to an engagement letter between Cephalon and BofA Merrill Lynch, dated April 30, 2011, Cephalon has agreed to pay BofA Merrill Lynch fees of approximately $21 million for its services as financial advisor to Cephalon, of which of $3 million became payable upon the delivery by BofA Merrill Lynch of its opinion to the board of directors of Cephalon, $4.5 million became payable upon the withdrawal by Valeant of its proposal to acquire Cephalon, and the remainder is contingent upon consummation of the merger. Cephalon may also pay BofA Merrill Lynch an additional discretionary fee based on Cephalon’s good faith evaluation of the services provided by BofA Merrill, determined in Cephalon’s sole discretion. Cephalon has also agreed to reimburse BofA Merrill Lynch for all reasonable documented out-of-pocket expenses (including any reasonable documented fees and disbursements of its outside counsel) incurred in connection with its engagement. Cephalon has also agreed to indemnify BofA Merrill Lynch against certain liabilities arising out of its engagement.

BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of its businesses, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Cephalon, Teva and certain of their respective affiliates.

BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Cephalon and have received or in the future may receive compensation for the rendering of these services, including having acted or acting (i) as financial advisor in connection with certain mergers and acquisitions transactions, including in connection with Cephalon’s pending acquisition of ChemGenex Pharmaceuticals Limited announced in March 2011 and (ii) as arranger, bookrunner and/or lender under certain credit facilities. Since January 1, 2009, BofA Merrill Lynch and its affiliates have received compensation from Cephalon of approximately $320,000 in the aggregate in respect of services provided by BofA Merrill Lynch and its affiliates to Cephalon unrelated to Valeant’s proposal and the proposed merger.

In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Teva and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as lender under certain credit facilities and (ii) having provided or providing certain treasury and trade services. Since January 1, 2009, BofA Merrill Lynch and its affiliates have received compensation from Teva of approximately $4.8 million in the aggregate in respect of services provided by BofA Merrill Lynch and its affiliates to Teva.

BofA Merrill Lynch’s opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to it as of, the date of the fairness opinion. It should be understood that subsequent developments may affect its opinion, and BofA Merrill Lynch does not have any obligation to update, revise, or reaffirm its opinion. The issuance of BofA Merrill Lynch’s opinion was approved by its Americas Fairness Opinion Review Committee.

Summary of Material Financial Analyses

The following is a summary of the material financial analyses contained in the joint presentation that was made by Deutsche Bank and BofA Merrill Lynch, which we refer to collectively as “Cephalon’s financial advisors”, to the board of directors of Cephalon on April 30, 2011 and that were used in connection with rendering their respective opinions described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Cephalon’s financial advisors, nor does the order in

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which the analyses are described represent the relative importance or weight given to the analyses by Cephalon’s financial advisors. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Cephalon’s financial advisors’ analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 28, 2011, and is not necessarily indicative of current market conditions.

The financial forecasts provided by Cephalon’s management to Cephalon’s financial advisors for their use in connection with their analyses contained two individual cases. The first case, which we refer to as the “50% probability adjusted case”, reflected a 50% probability of success with respect to Cephalon’s late-stage pipeline products. The second case, which we refer to as the “25% probability adjusted case”, reflected a 25% probability of success with respect to Cephalon’s late-stage pipeline products.

Discounted Cash Flow Analysis

Cephalon’s financial advisors performed a discounted cash flow analysis to determine a range of implied present values per share of Cephalon common stock as of June 30, 2011. Using estimates contained in the 50% probability adjusted case and the 25% probability adjusted case, Cephalon’s financial advisors applied discount rates ranging from 9.0% to 14.0%, reflecting estimates of Cephalon’s weighted average cost of capital, to the estimated future unlevered free cash flows of Cephalon through 2016 and to a range of estimated terminal values of Cephalon at the end of such period, respectively, to determine a range of implied enterprise values for Cephalon as of June 30, 2011. The terminal value was calculated by applying multiples ranging from 4.0x to 8.0x to estimated 2016 earnings before interest, taxes, depreciation and amortization (which we refer to as “EBITDA”). Cephalon’s financial advisors subtracted from the implied enterprise values Cephalon’s estimated net debt as of June 30, 2011 (taking into account the average market value of Cephalon’s equity interest in Mesoblast Limited for the 60-day period ended April 28, 2011) and change of control and other estimated payments associated with Cephalon’s outstanding convertible notes and convertible note hedge agreements and divided the result by the number of fully diluted shares of Cephalon common stock outstanding. This analysis resulted in ranges of implied present values per share of Cephalon common stock as of June 30, 2011 of approximately $43 to $72 based on the 50% probability adjusted case, and approximately $42 to $68 based on the 25% probability adjusted case.

Using the same methodology, discount rates and multiples, Cephalon’s financial advisors performed a discounted cash flow analysis based on estimated future unlevered free cash flows of Cephalon through 2023 and a range of estimated terminal values of Cephalon at the end of such period. This analysis resulted in ranges of implied present values per share of Cephalon common stock as of June 30, 2011 of approximately $69 to $123 based on the 50% probability adjusted case, and approximately $56 to $95 based on the 25% probability adjusted case.

Cephalon’s financial advisors also performed a sum-of-the-parts discounted cash flow analysis by applying discount rates ranging from 9.0% to 14.0%, reflecting estimates of Cephalon’s weighted average cost of capital, to Cephalon management’s estimates of the future unlevered free cash flows expected to be generated by Cephalon on a product-by-product basis for the life of each product and an estimated terminal value for Cephalon’s European and Asian businesses (other than with respect to Cephalon’s European business with respect to Oxycodone, Obatoclax, Cinquil, Lupuzor and Revascor and with no terminal value applied to Cephalon’s U.S. business) to derive a range of implied enterprise values for Cephalon. Cephalon’s financial advisors subtracted from the implied enterprise values Cephalon’s estimated net debt as of June 30, 2011 (taking into account the average market value of Cephalon’s equity interest in Mesoblast Limited for the 60-day period ended April 28, 2011) and change of control and other estimated payments associated with Cephalon’s outstanding convertible notes and convertible note hedge agreements and divided the result by the number of fully diluted shares of Cephalon common stock outstanding. This analysis resulted in a range of implied present values per share of Cephalon common stock of approximately $66 to $96 based on the 50% probability adjusted case, and $54 to $77 based on the 25% probability adjusted case.

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Price Targets and Historical Trading Analysis

Cephalon’s financial advisors reviewed the estimated price targets for the Cephalon common stock published by 15 Wall Street analysts before and after the public disclosure of the Valeant proposal to acquire Cephalon on March 29, 2011 and observed that the $81.50 per share merger consideration was higher than all of those targets published prior to such public disclosure and higher than all but one of those targets published after such public disclosure.

Cephalon’s financial advisors also reviewed the historical closing prices for the Cephalon common stock during the three-year period ended April 28, 2011 and noted that the $81.50 per share merger consideration was higher than the $70.79 high closing price for the Cephalon common stock for the 52-week period prior to public disclosure of the Valeant takeover proposal, the $77.37 high closing price for the Cephalon common stock during the 52-week period ended April 28, 2011 and the $80.26 high closing price for the Cephalon common stock during the three-year period ended April 28, 2011.

Present Value of Future Stock Price Analysis

Cephalon’s financial advisors calculated illustrative ranges of implied present values per share of Cephalon common stock based on implied future share prices for Cephalon common stock in 2013. For purposes of this analysis, Cephalon’s financial advisors derived a range of implied future share prices for Cephalon common stock in 2013 by applying forward price to earning multiples, or forward P/E multiples, ranging from 8.5x to 14.5x to Cephalon management’s estimated basic earnings per share, or basic EPS, for 2014. Cephalon’s financial advisors then applied discount rates ranging from 10% to 15%, reflecting their estimates of Cephalon’s cost of equity, to these implied future share prices. This analysis resulted in ranges of implied present values per share of Cephalon common stock of approximately $51 to $95 based on the 50% probability adjusted case, and approximately $50 to $94 based on the 25% probability adjusted case.

Using the same forward P/E multiples and discount rates, Cephalon’s financial advisors derived a range of present values per share of Cephalon common stock based on Cephalon’s estimated EPS for 2014 on a fully diluted basis, which were calculated by dividing Cephalon’s estimated net income for 2014 by the estimated number of fully diluted outstanding shares of Cephalon common stock in 2014, excluding any anti-dilutive impact of the convertible note hedge transactions. This analysis resulted in implied present values per share of Cephalon common stock ranging from $48 to $80 based on the 50% probability adjusted case, and from $47 to $79 based on the 25% probability adjusted case.

Comparable Companies Analysis

Cephalon’s financial advisors reviewed and compared certain financial information and commonly used valuation measurements for Cephalon with corresponding financial information and valuation measurements for the following selected companies:

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Although none of the selected companies is directly comparable to Cephalon, the companies included were chosen because they are U.S-listed publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of Cephalon. Accordingly, the analysis of publicly traded comparable companies was not simply mathematical. Rather, it involved complex considerations and qualitative judgments, reflected in the opinions of Cephalon’s financial advisors, concerning differences in financial and operating characteristics of the selected companies and other factors that could affect the public trading value of such companies.

Based on the closing prices of Cephalon common stock and the common stock of Valeant on March 29, 2011, the last trading day before the public disclosure of the Valeant proposal to acquire Cephalon, the closing prices of the common stock of the other selected companies on April 28, 2011, information contained in the most recent public filings of the selected companies and analyst consensus estimates of EBITDA and EPS for Cephalon and the selected companies, Cephalon’s financial advisors calculated the following multiples with respect to Cephalon and each of the selected companies:

The total enterprise values of Endo Pharmaceuticals Holdings Inc., Forest Laboratories, Inc. and Warner Chilcott Public Limited Company included the pro forma financial impact of certain recently announced transactions involving these companies based on publicly available information about these transactions. The total enterprise value of Cephalon was based on the closing price of Cephalon common stock on March 29, 2011, the average market value of Cephalon’s equity interest in Mesoblast Limited for the 60-day period ended April 28, 2011 and an estimate of Cephalon’s cash balance (based on Cephalon’s December 31, 2010 cash balance, adjusted for publicly announced acquisitions) and did not include the change of control and other estimated payments associated with Cephalon’s outstanding convertible notes and the related hedge transactions.

Cephalon’s financial advisors also calculated the same multiples for Cephalon based on the $81.50 per share merger consideration and estimated EBITDA and EPS for Cephalon contained in the 50% probability adjusted case and the 25% probability adjusted case. The total enterprise value of Cephalon used in these analyses included the change of control and other estimated payments associated with Cephalon’s outstanding convertible notes and the related hedge transactions and was calculated using the average market value of Cephalon’s equity interest in Mesoblast Limited for the 60-day period ended April 28, 2011 and Cephalon’s estimated cash balance as of June 30, 2011.

The results of this analysis are summarized as follows:

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Transaction Premia Analysis

Cephalon’s financial advisors reviewed publicly available information relating to the following selected acquisition transactions in the life sciences industry announced since 2006 that involved a U.S. listed publicly-traded target company with a total enterprise value of over $500 million in which the cash component of consideration represented at least 50% of the total consideration. We refer to these transactions as the “selected premium transactions”.

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Although none of the selected premium transactions is directly comparable to the proposed merger, the companies that participated in the selected premium transactions are such that, for purposes of analysis, the selected transactions may be considered similar to the proposed merger.

With respect to each selected premium transaction, Cephalon’s financial advisors calculated the premium or discount of the per share consideration to the closing price of the target’s common stock on the trading day that was one day and 30 days prior to the date on which the trading price of the target’s common stock was perceived to be affected by a potential transaction and to the highest closing price of the target’s common stock during the 52-week period prior to such date. The calculation of the premium or discount for each selected premium transaction excluded any contingent consideration (such as contingent value rights) payable pursuant to the applicable transaction. Cephalon’s financial advisors also calculated the premium of the $81.50 per share merger consideration to the $58.75 closing price per share of Cephalon common stock on March 29, 2011, the last trading day prior to Valeant’s public announcement of its proposal to acquire Cephalon, the $56.31 closing price per share of Cephalon common stock on February 28, 2011, the thirtieth day prior to such announcement and the $70.79 high closing price per share of Cephalon common stock for the 52-week period prior to such date. The results of this analysis are summarized as follows:

Precedent Transactions Analysis

Based on the $81.50 per share merger consideration and Cephalon’s cash balance as of December 31, 2010, adjusted for publicly announced acquisitions, Cephalon’s financial advisors derived a total enterprise value of Cephalon of approximately $7.36 billion, which took into account, among other things, the average market value of Cephalon’s equity interest in Mesoblast Limited for the 60-day period ended April 28, 2011 and the change of control and other estimated payments associated with Cephalon’s outstanding convertible notes and the related hedge transactions. Cephalon’s financial advisors then calculated the multiples of Cephalon’s total enterprise value to its revenue and EBITDA, respectively, for the twelve-month period ended December 31, 2010.

Cephalon’s financial advisors reviewed publicly available information relating to the following selected acquisition transactions in the life sciences industry announced since 2006 that involved a target company with a total enterprise value of over $500 million, which we refer to as the “selected precedent transactions”. Cephalon’s financial advisors also identified a sub-group of the selected precedent transactions as “tier 1 comparable transactions” because the target company in each of those transactions had internal growth prospects, research and design capabilities, product concentration and patent risk that Cephalon’s financial advisors considered more similar to those of Cephalon than the target companies in the other selected precedent transactions.

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Although none of the selected precedent transactions is directly comparable to the proposed merger, the companies that participated in the selected precedent transactions are such that, for purposes of analysis, the selected transactions may be considered similar to the proposed merger.

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