Delivering Cima
By Keith Haan
Senior Writer [BioCentury]
In pitching a competitive bid for Cima Labs Inc., Cephalon Inc. is hoping that it can build a franchise out of its fentanyl
business and leverage its drug delivery technologies, which are currently gathering dust. CEPH (West Chester, Penn.) last week proposed to acquire CIMA (Eden Prairie, Minn.) for $26 per share in cash, valuing the company at $376.6 million. The bid competes with a stock offer from aaiPharma Inc., which values CIMA at $368 million based on the closing prices of AAII and CIMA on Aug. 4.
We like their technology and their business model. They are a profitable drug delivery business,î said CEPH spokesperson Chip Merritt. CIMA´s technologies include its OraSolv fast-dissolving oral dosage form; DuraSolv, a more robust and durable oral dosage form; and OraVescent transmucosal technology, which has three variations and can be delivered at different points in the mouth and GI tract.
CEPH´s offer is 8.1 times CIMA´s 2002 total operating revenues of $46.6 million, which includes royalties and the sale of products it manufactures for its partners, as well as $11.5 million in product development fees and licensing revenues. Indeed, CIMA does no sales or marketing. For the first half of 2003, CIMA had revenues of $34.9 million and EPS of $0.47. Cash at June 30 was $133.7 million. For the full year, CIMA expects revenues of $70-$75 million and EPS of $0.47.
However, Merritt said that the offer was not driven simply by CIMAís current profit profile. ìWhat is important is not necessarily what they are doing right now, but what we think they can become, he said.
In particular, CEPH is looking at CIMA´s OraVescent fentanyl as a complement to its Actiq fentanyl lozenges, which CEPH markets to manage breakthrough pain in cancer patients. Actiq had 2002 sales of $126.7 million. While the fentanyls could be considered competitive, CEPH argues that the two are complementary products that both could be sold by CEPH´s sales force.
There will always be patients who will choose not to use Actiq, or who donít want to rub a stick in their mouth, said Merritt. Actiq is used as a lozenge on a stick, which could be of particular concern for cancer patients with mucositis, as transmucosal absorption is stimulated by rubbing the lozenge across the cheek. In contrast, the OraVescent version is a fast-dissolve transmucosal formulation. In July, CIMA said it was completing preparations for Phase III trials of the compound.
In addition, CEPH sees CIMA as a company that has the resources and the expertise to create new products using the drug delivery technologies that CEPH already has, but has not committed resources to developing. As of January, CIMA had 219 full-time employees, including 118 in manufacturing and quality assurance, and 74 in R&D. In addition to the transmucosal delivery system used in Actiq, which CEPH gained from its acquisition of Anesta Corp., CEPH has a fast-dissolving tablet technology it gained when it acquired Group Lafon SA.
Meanwhile, AAII (Wilmington, N.C.) said it did not plan to amend its offer in response to the bid by CEPH. CIMA shareholders would own 40.6% of the combined CIMA-AAII (see BioCentury, Aug. 11). The pre-deal valuation of CIMA was $356.5 million. |
