Cephalon launches bidding war
Bid for drugmaker Cima competes with AaiPharma deal
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 4:18 PM ET Aug. 21, 2003
NEW YORK (CBS.MW) -- Shares of Cima Labs soared nearly 14 percent Thursday after the company received a $26 a share cash offer from Cephalon.
Cima, which already has a $330 million merger pact with AaiPharma Inc., said it received a letter on Thursday from Cephalon pitching an alternative deal.
Cephalon's board has authorized an offer of $26 a share, subject to completion of due diligence. With 14.7 million Cima shares outstanding, Cephalon's proposal is valued at about $382 million.
Cima will meet with its advisers to consider the offer, the company said in a statement.
Shares of Cima added $3.27 to $26.86 in late afternoon trading Thursday. Cephalon (CEPH: news, chart, profile) shed 73 cents, or 1.6 percent, to $44.13 and AaiPharma (AAII: news, chart, profile) lost 62 cents, or 3.6 percent, to $16.67.
Competition
Cephalon's offer sets off a bidding war for Eden Prairie, Minn.-based Cima (CIMA: news, chart, profile), which specializes in fast dissolving oral drugs.
Cima makes three prescription products including Zomig ZMT for migraines, Remeron SolTab for depression and NuLev for irritable bowel syndrome. Zomig-ZMT, marketed by AstraZeneca, is its largest product, accounting for about 30 percent of 2003 revenue. Remeron ZolTab is another big product, representing about 21 percent of Cima's revenues.
Cephalon wants Cima because of competitive concerns. Cephalon's fastest growing drug is Actiq, which is used to treat severe cancer pain. The drug is mainly for patients that have grown resistant to other narcotics.
Cima is developing a drug, OraVescent, which is a potential competitor to Actiq, said analyst Anthony Green, of Craig Hallum Capital.
"It's logical that Cephalon would want to absorb Cima and eliminate a potential competitor," he said.
Earlier this month, Cima announced a $330 million stock agreement with AaiPharma. According to that agreement, Cima cannot enter into negotiations with a third party unless Cima's board believes, in good faith, that the proposed deal is more favorable to Cima.
Dr. Philip Tabbiner, AaiPharma's chief executive, said his company's offer is superior. "Our transaction will be immediately and substantially accretive to CIMA shareholders," he said Thursday.
AaiPharma, of Wilmington, N.C., makes pain management drugs, including narcotics Darvon and Darvocet, which targets mild to moderate pain relief.
The drugmaker is interested in Cima because Cima has $9 a share in cash on its balance sheet, while AaiPharma has $9 per share in debt. "Deleveraging the balance sheet is a good benefit for them," Green said. "They get access to Cima's proprietary fast dissolve technology."
AaiPharma's proposed acquisition of Cima is expected to be lower results for two years, so Green doesn't expect AaiPharma to sweeten its offer.
"It would be even more dilutive for AaiPharma shareholders," he said.
Luisa Beltran is a reporter for CBS.MarketWatch.com in New York. |
