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Cephalo refers to the head, skull, or brain of a cephalopod, or a class of marine mollusks.
In the Mercenaries minigame, female Majini in the Public Assembly stage tend to mutate into Cephalo more often than male Majini, possibly a reference to the fact that the first Cephalo met had burst out of Allyson.
Meeting this enemy the first time is possibly a reference from Resident Evil 4 by meeting Plaga in a similar way.