Exhibit 99
CIMA LABS Announces First-Quarter Financial Results; Patient
Enrollment Begins in OraVescent Fentanyl Phase III Clinical Trials
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--May 6, 2004--CIMA LABS INC.
(NASDAQ: CIMA) today reported financial results for the first quarter
ended March 31, 2004.
For the first quarter of 2004:
-- Revenues were $15.7 million, compared with $16.7 million in
the first quarter of 2003 and $20.8 million in the sequential
fourth quarter of 2003.
-- The Company's operating income was $198,000, compared with
operating income of $3.9 million in the first quarter last
year. CIMA reported an operating loss of $10.6 million for the
sequential fourth quarter of 2003.
-- The Company's net income was $53,000, or $0.00 per diluted
share, compared with net income of $3.2 million, or $0.22 per
diluted share, for the first quarter of 2003. CIMA reported a
net loss of $9.8 million, or $(0.67) per share, for the
sequential fourth quarter of 2003.
Operating income for the first quarter of 2004 includes $1.2
million in expenses related to the Company's proposed merger with
Cephalon, Inc. (NASDAQ: CEPH). Under generally accepted accounting
principles (GAAP), CIMA is required, as the accounting acquiree, to
expense costs related to the merger as they are incurred. Certain of
these costs are not considered tax deductible for financial reporting
purposes.
Excluding these merger-related expenses, pro forma operating
income for the first quarter of 2004 was $1.4 million (9.0 percent of
revenues), compared with $3.1 million (15.0 percent of revenues), for
the sequential fourth quarter of 2003. Excluding merger-related
expenses and assuming a normalized tax rate of 37.5 percent, pro forma
net income for the first quarter of 2004 was $1.3 million, or $0.08
per diluted share, compared with $2.3 million, or $0.16 per diluted
share, for the sequential fourth quarter of 2003.
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 first quarter of 2004 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.
Operations Review
"CIMA's partner-driven and proprietary businesses continued to
perform well in the first quarter," said Steven B. Ratoff, chairman
and interim CEO. "Revenue generated by two of our top three products
- -- Organon's Remeron SolTabs and AstraZeneca's Zomig ZMT -- increased
by a combined $2.0 million from the first quarter of 2003. Remeron
SolTabs remained strong despite generic competition in the United
States, suggesting that Organon is having success with its European
initiatives. Revenues from Wyeth declined from a year ago, as we were
shipping launch quantities of Alavert during the first quarter of
2003."
"Meanwhile, we made good progress in our OraVescent Fentanyl
development activity, initiating patient enrollment slightly ahead of
our second-quarter target. As we previously disclosed, we are on track
toward an OraVescent Fentanyl regulatory submission in 2005 and a
potential commercial launch in 2006," said Ratoff.
Stated Chief Operating Officer John Hontz, Ph.D., "Our capacity
expansion remained on schedule and on budget during the first quarter,
and we expect our third blister-packaged production line to be
operational by the middle of 2004. As a result, we will be able to
return to normal operations and cut back to a five-day workweek while
still meeting our partners' current production needs. Looking ahead,
due to the long lead times involved, we have placed an initial order
totaling $5 million in equipment for additional production capacity,
including requirements for CIMA's OraVescent Fentanyl."
Financial Review
Stated Chief Financial Officer James Hawley, "CIMA's first-quarter
revenue was on target. We reported better than expected bottom-line
results due to lower than anticipated R&D spending, stronger gross
profit on product sales based on a favorable product mix, and tight
operating expense controls. As a consequence, CIMA reported operating
income of $198,000 during the first quarter, versus the $3 million to
$4 million operating loss we had expected."
"First-quarter revenues from Wyeth's Alavert were down from the
sequential fourth quarter because a significant portion of our
shipments to Wyeth in Q4 were for packaging for future sale," said
Hawley. "Although revenues from Organon's Remeron SolTabs held up
quite well in the first quarter, we are seeing the effect of generic
competition in the U.S. Revenues from AstraZeneca's Zomig increased
sequentially and from the comparable quarter a year ago."
"While we expected patient enrollment in our Phase III OraVescent
Fentanyl clinical trials to begin in the second quarter, we built a
sizable cushion into our R&D forecast in the event we were able to
commence enrollment ahead of schedule. Although we were able to begin
enrollment late in the first quarter, our guidance proved too
aggressive and actual spending came in approximately $2.5 million
below our estimate," said Hawley.
"CIMA's cash and available-for-sale securities totaled $115.3
million at March 31, 2004, compared with $110.2 million at December
31, 2003," said Hawley. "Our cash position remains stable and strong,
and we concluded the quarter with no debt on our balance sheet."
Because CIMA recognized the remaining federal tax benefits from
prior net operating losses in the fourth quarter of 2003, the
Company's effective tax rate for the first quarter of 2004 was the
normalized 37.5 percent rate expected to be applied going forward to
pretax income before merger-related expenses.
Business Outlook
In light of CIMA's impending merger with Cephalon, the Company
will not be providing financial guidance for the second quarter of
2004. Looking at the full year, however, CIMA expects revenue derived
from its partner-based collaborative business to decline in 2004,
based on three factors: 1) Shipments of Alavert to Wyeth are expected
to be lower in 2004, reflecting unfavorable comparisons with the
product's launch year in 2003; 2) The introduction of a generic
version of Remeron SolTabs in the United States will have an adverse
effect on revenues from Organon; 3) AstraZeneca's decision to move
Zomig to an independent distributor will cause royalty revenue from
this partner to decline, as the selling price on which CIMA derives
royalties will be lower. Revenue from products the Company currently
expects its partners to launch in 2004 will partially offset the
anticipated decline in partner-based revenue. Furthermore, had CIMA
not entered into merger negotiations, the Company believes it would
have signed an agreement with a licensing partner for OraVescent
Fentanyl in 2004, which would have more than offset these factors.
Concluded Ratoff, "Our collaborative pipeline is strong, and
OraVescent Fentanyl is moving toward launch as planned. CIMA's
collaborative drug pipeline now includes a total of 16 partner-driven
products, 11 of which have been announced. We continue to expect Alamo
and Schwarz product launches in 2004, with an additional four to six
partner launches possible in 2005. We anticipate seeing the majority
of the products currently in our pipeline commercially launched by the
end of 2006. CIMA continues to be encouraged by the prospects for its
business."
Stockholders' Meeting
The merger agreement between CIMA and Cephalon requires CIMA to
have a meeting of its stockholders to vote on the proposed merger on
or before June 29, 2004. As a result, CIMA's board of directors has
established the close of business on Friday, May 14, 2004 as the
record date for such a meeting to be held on June 15, 2004. As
previously announced, the Federal Trade Commission is still reviewing
the transaction and the Company is not providing any information about
that process at this time. If the merger has not been cleared by June
15, 2004, the meeting may be postponed.
GAAP to Pro Forma Reconciliations
The following tables reconcile pro forma operating income, pro
forma net income, and pro forma net income per diluted share to those
reported under generally accepted accounting principles for the
three-month periods ended March 31, 2004 and 2003.
GAAP operating income to Pro Forma operating income
(In millions of dollars) Q1 Q1 Q4
2004 2003 2003
- ----------------------------------------------------------------------
GAAP operating income (loss) 0.2 3.9 (10.6)
- ----------------------------------------------------------------------
Add back: merger-related expenses 1.2 - 13.7
- ----------------------------------------------------------------------
Pro forma operating income 1.4 3.9 3.1
- ----------------------------------------------------------------------
GAAP net income to Pro Forma net income (effective tax rate of 37.5%)
(In millions of dollars, except per-share amounts) Q1 Q1 Q4
2004 2003 2003
- ----------------------------------------------------------------------
GAAP net income (loss) 0.1 3.2 (9.8)
- ----------------------------------------------------------------------
Add back: merger-related expenses 1.2 - 13.7
- ----------------------------------------------------------------------
Less: tax benefit as reported - - (0.2)
- ----------------------------------------------------------------------
Add back: tax expense as reported 0.8 1.8 -
- ----------------------------------------------------------------------
Less: tax expense at 37.5% (0.8) (1.8) (1.4)
- ----------------------------------------------------------------------
Pro forma net income 1.3 3.1 2.3
- ----------------------------------------------------------------------
Pro forma net income per diluted share 0.08 0.21 0.16
- ----------------------------------------------------------------------
First-Quarter Conference Call and Replay
CIMA will review its first-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 519244 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 which 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, the Company's proposed
merger with Cephalon, Inc., the timing of the introduction of new
products incorporating CIMA's technologies, the future success of
products marketed by CIMA's partners and CIMA's expected effective tax
rate. 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 Financial Statements
(in thousands, except per-share)
Unaudited
For the
Three Months Ended
March 31,
----------------
2004 2003
------- --------
Revenues:
Net sales $9,547 $10,068
Product development fees and
licensing 1,713 1,603
Royalties 4,434 5,002
------- --------
15,694 16,673
------- --------
Operating expenses:
Cost of goods sold 6,658 7,768
Research and product
development 4,700 2,507
Selling, general and
administrative 2,926 2,534
Merger-related 1,212 -
------- --------
15,496 12,809
------- --------
Operating income 198 3,864
Other Income 614 1,066
------- --------
Income before provision for income taxes 812 4,930
Provision for income taxes 759 1,772
------- --------
Net income $53 $3,158
======= ========
Net income per share:
Basic $.00 $.22
Diluted $.00 $.22
Weighted average shares outstanding:
Basic 14,552 14,282
Diluted 14,971 14,636
Selected Balance Sheet Data
(in thousands)
March 31, December 31,
2004 2003
(unaudited) (audited)
Cash, cash equivalents and available-for-sale
securities - current & non-current $115,298 $110,157
Trade accounts receivable, net 8,952 14,686
Inventories, net 7,676 7,289
Property, plant & equipment, net 80,097 78,112
Deferred tax assets, net 14,331 14,008
Total assets 231,991 230,268
Current liabilities 15,053 15,689
Stockholders' equity 216,938 214,579
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