Exhibit 99
CIMA LABS Announces Fourth-Quarter and Full-Year 2003 Financial Results;
Company Reports Seventh Consecutive Quarter of Record Revenues
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Feb. 26, 2004--CIMA LABS
INC. (NASDAQ: CIMA) today reported financial results for the fourth
quarter and 12 months ended December 31, 2003.
For the fourth quarter of 2003:
-- Revenues increased 34 percent to $20.8 million from $15.5
million in the fourth quarter of 2002, and rose sequentially
from $20.3 million in the third quarter of 2003.
-- The Company's GAAP operating loss was $10.6 million, compared
with GAAP operating income of $4 million for the fourth
quarter of 2002, and $930,000 in the sequential third quarter
of 2003.
-- Due to lower reinvestment rates, other income, principally
investment income, declined to $624,000 from $1.3 million in
the fourth quarter of 2002.
-- The Company's GAAP net loss was $9.8 million, or $(0.67) per
share, compared with net income of $6.7 million, or $0.45 per
diluted share, for the fourth quarter of 2002. GAAP net income
for the sequential third quarter of 2003 was $972,000, or
$0.07 per diluted share.
The operating loss for the fourth quarter of 2003 included $13.7
million in expenses related to the Company's terminated merger with
aaiPharma, Inc. (NASDAQ: AAII) and its ongoing proposed merger with
Cephalon, Inc. (NASDAQ: CEPH). These merger-related expenses included
the payment of an $11.5 million break-up fee to aaiPharma, as well as
advisory, investment banking, legal and administrative expenses. Under
generally accepted accounting principles (GAAP), CIMA is required, as
the accounting acquiree in both transactions, to expense costs related
to the mergers as they are incurred. Certain of these costs are not
considered tax deductible for financial reporting purposes based on
new IRS rules.
Excluding these merger-related charges, pro forma operating income
for the fourth quarter of 2003 was $3.1 million (15.0 percent of
revenues), compared with $4 million (25.9 percent of revenues) for the
fourth quarter of 2002. Pro forma net income for the fourth quarter of
2003, excluding merger-related expenses, was $3.2 million, or $0.21
per diluted share.
CIMA's pro forma operating income, pro forma net income, and pro
forma net income per diluted share are not based on GAAP. The Company
believes such non-GAAP information provides investors with an
additional means of measuring corporate performance and a consistent
basis for comparing CIMA's results for the fourth quarter of 2003 with
results for prior quarters. Within this news release, the Company has
included tables that provide a reconciliation of these pro forma
measures to comparable measures reported under GAAP.
For the full year 2003:
-- Revenues grew 63 percent to $76.1 million from $46.6 million
in 2002.
-- Including merger-related expenses, the Company's GAAP
operating loss was $1.5 million, compared with GAAP operating
income of $9.8 million last year.
-- Due to lower reinvestment rates, other income, principally
investment income, declined to $3.3 million from $6.4 million
in 2002.
-- CIMA's GAAP net loss was $2.0 million, or $(0.14) per share,
compared with GAAP net income of $18.6 million, or $1.28 per
diluted share, in 2002.
Operations Review
"CIMA reported its seventh consecutive quarter of record revenues,
and the Company's revenue for the full year 2003 was in line with our
upwardly revised guidance of $75 million to $77 million," said Steven
B. Ratoff, chairman and interim CEO. "Posting 63 percent revenue
growth in 2003 was a significant achievement, given the demands placed
on our organization by the extraordinary level of M&A activity during
the second half of the year. Equally significant, we continued to
operate profitably on a pro forma basis even as we increased our
investments in capacity expansion and the development of OraVescent
Fentanyl. For the quarter, Organon's Remeron SolTabs, Wyeth's Alavert,
and AstraZeneca's Zomig continued to be our major revenue generators."
"Our fourth-quarter pipeline and business development initiatives
continued to focus on CIMA's proprietary OraVescent Fentanyl, the
first product generated as a result of the dual operating strategy we
initiated last year," Ratoff said. "We concluded a successful End of
Phase II meeting with the U.S. Food and Drug Administration (FDA), and
have begun our preparations for the Phase III Safety and Efficacy
clinical trials. We expect to begin enrolling patients during the
second quarter of 2004. We believe that CIMA is on target to achieve
its plans to file a regulatory submission for OraVescent Fentanyl in
early 2005, with commercial introduction occurring in early 2006."
Stated Chief Operating Officer John Hontz, Ph.D., "From an
operational standpoint, CIMA again performed well during the fourth
quarter. In order to meet our partners' production needs, we continued
to operate at levels substantially above normal capacity. At the same
time, we stayed on track and on budget with our capacity expansion
projects."
"Although our partners delayed the introduction of two products we
had expected them to launch in the fourth quarter, production of ODT
tablets rose 40 percent from a year ago, contributing to a nearly 84
percent increase in manufacturing volume for the full year," Hontz
said. "CIMA's pipeline includes a total of 17 partner-driven products.
We expect our partners to launch two products in 2004, with the
potential for an additional four to six launches in 2005."
Financial Review
Stated Chief Financial Officer James Hawley, "CIMA performed well
financially in the fourth quarter. We generated record revenue and
solid pro forma operating income even as we invested in capacity
expansion and increased R&D spending by $1.1 million sequentially as a
result of accelerating OraVescent Fentanyl development expenses."
"We recognized the remaining federal tax benefits from net
operating losses in the fourth quarter of 2003," continued Hawley.
"CIMA's effective tax rate for the fourth quarter was 1.7%, and 16.0%
on a pro forma basis, excluding the merger-related expenses. We expect
a normalized tax rate of approximately 37.5% to apply to CIMA's
earnings in 2004 and beyond. Earnings per diluted share at the fully
taxed rate of 37.5%, excluding merger-related expenses, would have
been $0.16 for the fourth quarter of 2003 compared with $0.23 for the
fourth 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 $110.2
million at December 31, 2003, compared with $131.7 million at December
31, 2002. The decline in cash and available-for-sale securities
reflects our investments in manufacturing capacity expansion,
transaction-related expenses, and increased OraVescent Fentanyl
spending. We continued to have no debt on our balance sheet,"
concluded Hawley.
Business Outlook
"Looking ahead to the first quarter of 2004, our partner-based
collaborative product business is facing several challenges," Ratoff
said. "A significant portion of our Q4 shipments to Wyeth were for
packaging for future sale, and our first-quarter Alavert shipments are
expected to decline as a result. This factor, coupled with the impact
of the Alavert launch in Q1 of 2003, will produce unfavorable
year-over-year comparisons. In addition, the long-anticipated
introduction by Barr Laboratories of a generic competitor to Remeron
SolTabs in the U.S. market, which took place during the fourth quarter
of 2003, will have an effect on our business during the first quarter.
Also, AstraZeneca recently signed an agreement to market Zomig through
an independent distributor in the United States. We expect this to
result in an adverse royalty revenue effect from our partner because
the selling price on which we generate royalties will be lower."
The Company expects the combined effect of these developments to
reduce CIMA's first-quarter partner-driven revenue by approximately $1
million to $1.5 million from the comparable period a year ago. CIMA
anticipates that partner launches during the year of
Company-manufactured products will partially offset the effect of
these factors in 2004. CIMA anticipates that Organon, Wyeth and
AstraZeneca will represent approximately 41 percent, 20 percent and 17
percent of revenues, respectively, for the first quarter.
For the first quarter of 2004, CIMA expects its revenue component
mix to include product sales revenues of approximately 60 percent,
product development and licensing revenues of approximately 10
percent, and revenues from royalties of approximately 30 percent.
Given the anticipated decline in partner-driven sales and an
associated reduction in manufacturing volume, CIMA expects
first-quarter 2004 gross profit margins on manufactured products to
decline to between 18.5 percent and 20.5 percent. This also reflects
the increase in overhead due to the Company's recent investments in
manufacturing capacity expansion, undertaken in anticipation of future
growth requirements. Reflecting the start of the Phase III clinical
trials for OraVescent Fentanyl, CIMA's R&D expense for the first
quarter of 2004 is anticipated to rise to the range of $7 million to
$7.5 million. The Company expects selling, general and administrative
expenses to be in the range of $3.8 million to $4.5 million, including
estimated transaction costs and costs related to CIMA's ongoing patent
litigation.
Considering the variables above, CIMA expects a first-quarter
operating loss in the range of $3 million to $4 million.
Concluded Ratoff, "In light of CIMA's impending merger with
Cephalon, we will not be providing financial guidance for full-year
2004. As we've stated previously, we expect to close the deal upon
completion of the HSR clearance process, and the satisfaction of all
of the closing conditions in the merger agreement. We continue to
believe that the long-term prospects for CIMA's business remain
bright. OraVescent Fentanyl is moving rapidly into the clinic and we
continue to make progress in moving our partner products through the
development pipeline. We've assembled a tremendous team and created
strong partner relationships. Most important, CIMA has succeeded in
developing ODT technologies that are becoming increasingly recognized
across the pharmaceutical industry and we expect this recognition to
generate strong long-term growth for our business."
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 12-month periods ended December 31, 2003 and 2002.
GAAP operating income to Pro Forma operating income
(In millions of dollars) Q4 Q4 12 Mos. 12 Mos.
2003 2002 2003 2002
GAAP operating income (loss) (10.6) 4.0 (1.5) 9.8
Add back: merger-related expenses 13.7 - 17.4 -
Pro forma operating income 3.1 4.0 15.9 9.8
GAAP 2003 net income to Pro Forma 2003 net income (effective tax rate
of 16% in Q4, 27% 2003)
(In millions of dollars, except Q4 12 Mos.
per-share amounts) 2003 2003
GAAP net (loss) (9.8) (2.0)
Add back: merger-related expenses 13.7 17.4
Less: tax expense at pro forma (0.5) (5.1)
Less: tax benefit as reported (0.2) -
Add back: tax expense as reported - 3.7
Pro forma net income 3.2 14.0
Pro forma net income per diluted
share 0.21 0.95
GAAP net income to Pro Forma net income (effective tax rate of 37.5%)
(In millions of dollars, except Q4 Q4 12 Mos. 12 Mos.
per-share amounts) 2003 2002 2003 2002
GAAP net income (loss) (9.8) 6.7 (2.0) 18.6
Add back: merger-related expenses 13.7 - 17.4 -
Less: tax benefit as reported (0.2) (1.4) - (2.4)
Add back: tax expense as reported - - 3.7 -
Less: tax expense at 37.5% (1.4) (2.0) (7.2) (6.1)
Pro forma net income 2.3 3.3 12.0 10.1
Pro forma net income per diluted
share 0.16 0.23 0.81 0.69
Fourth-Quarter Conference Call and Replay
CIMA will review its fourth-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 497860 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, CIMA's first-quarter 2004
expectations for partner-driven revenue, revenue component mix, gross
margin on manufactured products, operating and merger-related
expenses; the future success of products marketed by CIMA's partners;
CIMA's expected effective tax rate; and the timing of the introduction
of new products incorporating CIMA's technologies. 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. 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 Full Year Ended
December 31 December 31
2003 2002 2003 2002
Operating Revenues:
Net sales $13,396 $8,420 $49,061 $23,391
Product development fees and
licensing 1,602 2,887 6,163 11,496
Royalties 5,796 4,194 20,852 11,738
Total operating revenues 20,794 15,501 76,076 46,625
Operating expenses:
Cost of goods sold 9,892 6,540 34,578 18,481
Research and product
development 4,701 2,858 13,519 10,641
Selling, general and
administrative 3,076 2,083 12,112 7,710
Merger expenses 13,705 - 17,413 -
Total operating expenses 31,374 11,481 77,622 36,832
Operating income (10,580) 4,020 (1,546) 9,793
Other income 624 1,257 3,296 6,383
Income before provision
for taxes (9,956) 5,277 1,750 16,176
Income tax expense (benefit) (167) (1,385) 3,725 (2,441)
Net income (loss) $(9,789) $6,662 $(1,975) $18,617
Net income (loss) per basic
share $(0.67) $0.47 $(0.14) $1.31
Net income (loss) per diluted
share $(0.67) $0.45 $(0.14) $1.28
Weighted average of number of
shares:
Basic 14,531 14,234 14,420 14,193
Diluted 14,531 14,655 14,420 14,599
SELECTED BALANCE SHEET DATA
(in thousands)
December 31, December 31,
2003 2002
(unaudited) (audited)
Cash, cash equivalents and available-for-
sale securities - current & non-current $110,157 $131,681
Trade accounts receivable, net 14,686 14,621
Inventories, net 7,289 4,082
Property, plant & equipment, net 78,112 61,074
Deferred tax assets, net 14,008 11,414
Total assets 230,268 225,353
Current liabilities 15,689 12,052
Stockholders' equity 214,579 213,301
CONTACT: CIMA LABS INC.
James Hawley, 952-947-8700
investorrelations@cimalabs.com
or
Sharon Merrill Associates, Inc.
Ehren Lister, 617-542-5300
elister@investorrelations.com