2006 was an eventful year for shareholders of midsized drugmaker Cephalon (NASDAQ:CEPH), as the company prepared for patent expiration and subsequent generic competition for one of its top drugs. Cephalon capped off its wild year by announcing its 2006 financial results this week.

Sales came in at $1.7 billion in 2006, up 48% versus 2005. Diluted earnings (excluding certain charges) more than doubled to $4.81 a share, thanks to stout gains in sales of Cephalon's central-nervous-system compound Provigil. In a further boost to earnings, its No. 2 drug, pain product Actiq, experienced only an 8% decline in sales, despite the introduction of generic competition this quarter.

Cephalon introduced two new drugs last year, with mixed results. Alcohol-dependence treatment Vivitrol appears to be a big flop, with partner Alkermes (NASDAQ:ALKS) only projecting $5 million-$10 million in sales this year. Cephalon's follow-on pain treatment Fentora has gotten off to a much better start, clocking $29 million in sales in its first quarter on the market. Impressively, Fentora sales didn't cannibalize Actiq income, with sales of the former drug only dropping by $9 million.

Cephalon doesn't have much of a drug pipeline, so for the interim, it's dependent on its sleep franchise drugs and pain treatments to pull up its top line. That said, it hasn't been afraid to make acquisitions in the past. Given the further generification of Actiq this year, the company is forecasting roughly flat revenue for the year, but increased SG&A spending should further reduce adjusted earnings to between $3.90 and $4.00 a share.

Shareholders should keep in mind that Cephalon is either loose with its estimates or fond of revising earnings, because it constantly revises its forward sales and earnings guidance range. Last year, its actual net income numbers were off by 45% compared to its projections for the year. If Cephalon can keep to its guidance, and pain drug Fentora continues its red-hot sales trajectory, investors patient enough to stick with Cephalon through 2007 may be rewarded when the top line starts to pick up again in 2008.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.