Exhibit 99
CIMA LABS Announces Third-Quarter 2003 Financial Results;
Product Sales More Than Double, Royalties Up 76 Percent Year-Over-Year
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Oct. 30, 2003--CIMA LABS
INC. (NASDAQ: CIMA) today reported financial results for the third
quarter ended September 30, 2003.
-- Revenues increased 62% to $20.3 million from $12.5 million in
the third quarter of 2002, and grew sequentially from $18.3
million in the second quarter of 2003.
-- GAAP operating income was $930,000 (4.6% of revenues),
compared with $2.3 million (18.5% of revenues) a year ago, and
$4.2 million (23.2% of revenues) in the sequential second
quarter of 2003.
-- Other income, principally investment income, declined to
$757,000 in the third quarter of 2003 from $1.5 million last
year due to lower reinvestment rates.
-- GAAP net income was $972,000, or $0.07 per share on a diluted
basis, compared with $4.4 million, or $0.30 per diluted share,
for the third quarter of 2002.
Included in operating income for the third quarter of 2003 was
$3.5 million in advisory, investment banking, legal and administrative
expenses related to the Company's proposed merger with aaiPharma, Inc.
(NASDAQ: AAII). Under Generally Accepted Accounting Principles (GAAP),
CIMA is required, as the accounting acquiree in the transaction, to
expense costs related to the merger as they are incurred.
Additionally, for U.S. federal tax purposes, these costs are not tax
deductible.
Excluding these merger-related charges, pro forma operating income
for the third quarter of 2003 increased 89% from last year to $4.4
million (21.6% of revenues). Pro forma net income for the third
quarter of 2003, excluding merger-related expenses, was $3.8 million,
or $0.26 per diluted share, at the upper end of CIMA's initial
guidance range of $0.24-$0.27.
CIMA's pro forma operating income, pro forma net income, and pro
forma net income per diluted share are not based on Generally Accepted
Accounting Principles (GAAP). The Company believes such information
provides an additional measurement and a consistent historical
comparison of the Company's performance. Within this news release,
CIMA has included tables that provide a reconciliation of these pro
forma measures to comparable measures reported under GAAP.
Comments on the Third Quarter
"Thanks to a tremendous team effort across the entire CIMA
organization, this was another great quarter for the Company," said
Steven B. Ratoff, chairman and interim CEO. "We hit the high end of
our third-quarter guidance range for revenue on strong sales of
Remeron SolTabs and Alavert to our partners. Meanwhile, CIMA's
operating leverage continued to improve. As a result, excluding
merger-related expenses, pro forma operating income nearly doubled
from the third quarter a year ago."
"Wyeth's orally disintegrating tablet (ODT) form of Alavert, its
over-the-counter antihistamine, eclipsed Organon's Remeron SolTabs to
become CIMA's top product sales revenue contributor in the third
quarter," said Ratoff. "Our shipments of Alavert nearly doubled from
the sequential second quarter, and Wyeth's production forecasts
suggest that Alavert will continue to be a growing source of revenue
for CIMA this year. At the same time, our previous forecasts for
Remeron SolTabs remain on target. Organon continues its aggressive
European marketing campaign for this ODT medication for depression,
and U.S. sales of Remeron SolTabs have held up well, despite
competition from generic forms of standard Remeron. Including the four
other pharmaceuticals marketed by CIMA's partners, total shipments of
ODT tablets increased nearly 10% sequentially in the third quarter and
more than doubled from the third quarter a year ago."
"CIMA continued to make progress on its product pipeline during
the third quarter," said Ratoff. "The Company remains in active
discussions regarding new projects with current and potential
partners, and we are excited about the opportunities we see to expand
our pipeline with future collaborative and proprietary products. We
are waiting for notification from our partners regarding the FDA
approvals for two partner products, and we are in the process of
preparing for their launches. Depending on the timing of the
approvals, our partners may launch these products either in late 2003
or early 2004. Including these products, we expect our partners to
launch five to seven new ODT pharmaceuticals by the end of 2004.
Meanwhile, CIMA continued moving forward on the development of its
first proprietary pharmaceutical product, our OraVescent Fentanyl
medication for breakthrough cancer pain."
"As we announced earlier this month, we expect to meet with the
Food & Drug Administration (FDA) to discuss Phase III clinical trial
protocols for OraVescent Fentanyl before the end of 2003," said
Ratoff. "We are prepared to commence our safety and efficacy pivotal
clinical trials early in 2004 and believe that CIMA is on target to
achieve its plans to file a regulatory submission for OraVescent
Fentanyl late in 2004 or early 2005, with a product launch occurring
in late 2005 or early 2006."
Chief Operating Officer John Hontz, Ph.D., commented on the
Company's manufacturing capacity expansion: "The CIMA team continued
to operate round-the-clock to meet our partners' production
requirements during the third quarter. We also made great progress on
our capacity expansion activity, which is aimed at substantially
increasing CIMA's ability to manufacture both bottled and
blister-packaged tablets in 2004. We received the FDA's go-ahead for
our first bottled tablet manufacturing line, which should provide us
with annual capacity of 700 million bottled tablets beginning late in
the fourth quarter of 2003. We also started construction to
accommodate a third production line for blister-packaged tablets. This
should increase our blister-packaged capacity from 600 million to 1
billion tablets by the end of the first quarter of 2004."
Financial Review
"Net product sales to our partners increased 119% from last year
to $13.3 million in the third quarter of 2003," said James Hawley,
CIMA's chief financial officer. "Although we had essentially reached
full production capacity in the second quarter, we were able to
increase sales to our partners by 9% on a sequential basis."
"Product development fees and license revenues were $1.4 million,
declining from $3.2 million a year ago and $1.6 million for the
sequential second quarter," said Hawley. "We have renegotiated the
nature and timing of payments for certain in-process R&D activities,
which places greater emphasis on long-term development milestones and
less emphasis on early-stage payments."
"Royalty revenues increased 76% year-over-year and 27%
sequentially to $5.6 million for the third quarter of 2003," said
Hawley. "The increase from last year resulted from higher partner
sales of Remeron SolTabs, Alavert and Zomig-ZMT.
"As CIMA's business matures, our operating leverage and operating
earnings quality continue to improve," said Hawley. "Gross margins are
improving as a result of better absorption of fixed costs and a
favorable manufacturing mix. Despite increased costs related to patent
defense litigation, pro forma operating income, excluding
merger-related expenses, represented 85% of CIMA's total pro forma
pre-tax income in the third quarter of 2003. The comparable figure a
year earlier was 62%."
CIMA used approximately $1.2 million of its remaining tax benefits
in the third quarter of 2003, with the remaining $100,000 to be
recognized during the fourth quarter. CIMA's effective tax rate for
the third quarter was 42.4%, and 26% on a pro forma basis, excluding
the merger-related expenses. A normalized tax rate of approximately
37.5% is expected to apply to CIMA's earnings subsequent to
recognizing the remaining tax benefits. Earnings per diluted share at
the fully taxed rate of 37.5%, excluding merger-related expenses,
would have been $0.22 for the third quarter of 2003 compared with
$0.16 for the third quarter of 2002. CIMA's fully taxed earnings per
share are a non-GAAP financial measure that the Company is using to
provide a comparison to prior quarters. A reconciliation of fully
taxed earnings per share to the comparable GAAP financial measure is
included in the statements incorporated as part of this news release.
CIMA's cash and available-for-sale securities totaled $129.9
million at September 30, 2003, compared with $131.7 million at
December 31, 2002. The Company continued to have no debt on its
balance sheet at the end of the third quarter of 2003.
Outlook and Guidance
"CIMA is on track to achieve solid revenue growth in 2003," said
Ratoff. "Product sales to our partners are meeting, and in some cases
surpassing, our expectations, and royalty revenues are trending
upward. For the full year 2003, we expect revenues to be in the range
of $75 million to $77 million. We now expect our full-year revenue
component mix to include product sales revenues in excess of 60%,
product development and licensing revenues of less than 10%, and
revenues from royalties approaching 30%."
In the fourth quarter, CIMA expects to incur additional
merger-related expenses that the Company is unable to quantify at the
present time and, as a result, is not providing full-year 2003
earnings guidance.
Nine-Month Results
For the nine-month period ended September 30, 2003:
-- Revenues increased 78% to $55.3 million from $31.1 million for
the comparable period in 2002.
-- GAAP operating income was $9 million (16.3% of revenues),
compared with $5.8 million (18.5% of revenues) for the
year-earlier period.
-- Other income, principally investment income, declined to $2.7
million from $5.1 million a year earlier.
-- GAAP net income was $7.8 million, or $0.53 per share on a
diluted basis, compared with $12 million, or $0.82 per diluted
share, for the comparable period in 2002.
Included in operating income for the nine months ended September
30, 2003 were $3.7 million in expenses related to the Company's
proposed merger with aaiPharma, Inc. CIMA is required under GAAP to
expense these costs and they are not tax deductible for federal tax
purposes. Excluding these charges, pro forma operating income for the
nine months ended September 30, 2003 increased 121% from the
comparable year-earlier period to $12.7 million (23.0% of revenues).
Pro forma net income year-to-date in 2003, excluding merger-related
expenses, was $10.8 million, or $0.74 per diluted share.
CIMA recorded a small tax benefit in the nine months ended
September 30, 2002 and its effective tax rate for the comparable
period in 2003 was 33.2%. The pro forma operating income and net
income, excluding merger-related expenses, for the nine months ended
September 30, 2003 reflect an effective tax rate of 30%. Pro forma
earnings per diluted share at the fully taxed rate of 37.5% would have
been $0.65 for the first nine months of 2003 compared with $0.47 for
the same period in 2002.
CIMA's pro forma operating income, pro forma net income, and pro
forma net income per diluted share are not based on Generally Accepted
Accounting Principles (GAAP). The Company believes such information
provides an additional measurement and a consistent historical
comparison of the Company's performance. Within this news release,
CIMA has included tables that provide a reconciliation of these pro
forma measures to comparable measures reported under GAAP.
GAAP to Pro Forma Reconciliations
The following tables reconcile pro forma operating income, pro
forma net income, and pro forma income per diluted share to those
reported under Generally Accepted Accounting Principles for the three-
and nine-month periods ended September 30, 2003 and 2002.
GAAP operating income to Pro Forma operating income
(In millions of dollars) Q3 Q3 YTD YTD
2003 2002 2003 2002
- ----------------------------------------------------------------------
GAAP operating income 0.9 2.3 9.0 5.8
- ----------------------------------------------------------------------
Add back: merger-related expenses 3.5 - 3.7 -
- ----------------------------------------------------------------------
Pro forma operating income 4.4 2.3 12.7 5.8
- ----------------------------------------------------------------------
GAAP 2003 net income to Pro Forma 2003 net income (effective tax rate
of 26% in Q3, 30% YTD)
(In millions of dollars, except per-share amounts) Q3 YTD
2003 2003
- ----------------------------------------------------------------------
GAAP net income 1.0 7.8
- ----------------------------------------------------------------------
Add back: merger-related expenses 3.5 3.7
- ----------------------------------------------------------------------
Less: tax expense at pro forma (1.4) (4.6)
- ----------------------------------------------------------------------
Add back: tax expense as reported 0.7 3.9
- ----------------------------------------------------------------------
Pro forma net income 3.8 10.8
- ----------------------------------------------------------------------
Pro forma net income per diluted share 0.26 0.74
- ----------------------------------------------------------------------
GAAP net income to Pro Forma net income (effective tax rate of
37.5%)
(In millions of dollars, except per-share Q3 Q3 YTD YTD
amounts) 2003 2002 2003 2002
- ----------------------------------------------------------------------
GAAP net income 1.0 4.4 7.8 12.0
- ----------------------------------------------------------------------
Add back: merger-related expenses 3.5 - 3.7 -
- ----------------------------------------------------------------------
Add back: tax expense as reported 0.7 (0.6) 3.9 (1.1)
- ----------------------------------------------------------------------
Less: tax expense at 37.5% (1.9) (1.4) (5.8) (4.1)
- ----------------------------------------------------------------------
Pro forma net income 3.3 2.4 9.6 6.8
- ----------------------------------------------------------------------
Pro forma net income per diluted share 0.22 0.16 0.65 0.47
- ----------------------------------------------------------------------
Third-Quarter Conference Call and Replay
CIMA will review its third-quarter operating results in a
conference call at 4:30 p.m. ET today. A replay of the conference call
will be available for one week by dialing 719-457-0820 and providing
the 687062 confirmation code. Investors also can listen to the
conference call by visiting the Company's website, www.cimalabs.com.
The call will be archived on this site.
About CIMA LABS
CIMA develops and manufactures prescription and over-the-counter
products based upon its proprietary, orally disintegrating drug
delivery technologies, OraSolv(R) and DuraSolv(R). Based on its
technologies, an active drug ingredient, which the company frequently
taste-masks, is formulated into a new, orally disintegrating dosage
form that dissolves quickly in the mouth without chewing or the need
for water. The company develops and manufactures orally disintegrating
versions of drugs for pharmaceutical company partners for whom CIMA
currently produces three branded prescription pharmaceuticals and
three over-the-counter brands. CIMA also is developing proprietary
products utilizing its orally disintegrating technologies, as well as
its new OraVescent(R) enhanced absorption, transmucosal drug delivery
system.
Safe Harbor Statement
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited to those relating to CIMA's
financial expectations for earnings and revenues for 2003, the mix of
revenues, the future success of products marketed by CIMA's partners,
CIMA's expected effective tax rate, the timing of the introduction of
new products incorporating CIMA's technologies and the receipt of
product development fees, and the Company's manufacturing capacity. A
number of factors could cause actual results to differ materially from
CIMA's assumptions and expectations. These factors include the
successful completion of feasibility projects, consumer acceptance of
products incorporating CIMA's technologies, the receipt of firm orders
for these products, the success of pharmaceutical companies in
marketing products incorporating CIMA's technologies, production
costs, production yields, agreeing to commercial terms with
pharmaceutical companies for new collaborative development and license
agreements, capacity utilization of product development and
manufacturing resources, the outcome of tests in humans of proposed
products, returns on investments, and recognition of income tax
benefits. Additional factors that may cause actual results to differ
from CIMA's assumptions and expectations include those set forth under
the heading "Factors That Could Affect Future Results" included in
CIMA's most recent filings with the Securities and Exchange
Commission, including the Company's Quarterly Reports on Form 10-Q for
the periods ended March 31, 2003 and June 30, 2003. All
forward-looking statements are qualified by, and should be considered
in conjunction with, such cautionary statements. These forward-looking
statements speak only as of the date on which they are made. CIMA
disclaims any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Condensed Income Statement
(in thousands, except per share)
Unaudited Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------
2003 2002 2003 2002
--------- --------- --------- --------
Operating Revenues:
Net sales $13,345 $6,094 $35,665 $14,971
Product development
fees and licensing 1,364 3,242 4,561 8,609
Royalties 5,628 3,205 15,056 7,544
--------- --------- --------- --------
Total operating
revenues 20,337 12,541 55,282 31,124
Operating expenses:
Cost of goods sold 9,484 4,913 24,686 11,941
Research and product
development 3,608 3,328 8,818 7,783
Selling, general and
administrative 2,857 1,983 9,036 5,627
Merger expenses 3,458 - 3,708 -
--------- --------- --------- --------
Total operating
expenses 19,407 10,224 46,248 25,351
Operating income 930 2,317 9,034 5,773
Other income 757 1,450 2,672 5,126
--------- --------- --------- --------
Income before provision
for taxes 1,687 3,767 11,706 10,899
Income tax expense
(benefit) 715 (616) 3,892 (1,056)
--------- --------- --------- --------
Net income $972 $4,383 $7,814 $11,955
========= ========= ========= ========
Net income per
basic share $0.07 $0.31 $0.54 $0.84
Net income per
diluted share $0.07 $0.30 $0.53 $0.82
Weighted average of
number of shares:
Basic 14,488 14,209 14,382 14,172
Diluted 14,881 14,598 14,739 14,598
SELECTED BALANCE SHEET DATA
(in thousands)
September 30, December 31,
2003 2002
(unaudited) (audited)
Cash, cash equivalents and
available-for-sale securities
- current & non-current 129,901 $131,681
Trade accounts receivable, net 14,901 14,621
Inventories, net 7,548 4,082
Property, plant & equipment, net 71,525 61,074
Deferred tax assets, net 9,399 11,414
Total assets 236,057 225,353
Current liabilities 11,271 12,052
Stockholders' equity 224,786 213,301
CONTACT: CIMA LABS INC.
James Hawley, CFO, 952/947-8700
investorrelations@cimalabs.com
or
Sharon Merrill Associates, Inc.
Ehren Lister, Account Executive, 617/542-5300
elister@investorrelations.com