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Biotech / Medical : CEPH - CEPHALON -- Ignore unavailable to you. Want to Upgrade?

To: Icebrg who wrote (71)	11/4/2003 11:15:18 AM
From: Icebrg	Read Replies (1) \| Respond to of 109

Cima picks second suitor BY JIM MCCARTNEY Pioneer Press The courting of Cima Labs Inc. appears to be over as the Eden Prairie-based drug company has signed a merger agreement that looks like it will stick. The maker of a coveted fast-dissolving pill technology signed a deal to sell itself to Cephalon Inc., a West Chester, Pa.-based drug company, for $34 per share in cash — about a third more than a previous stock-swap merger offer by AaiPharma. The deal totals about $515 million, or $397 million after deducting how much cash Cephalon will get from Cima. The deal appears to end two months of uncertainty about Cima's fate after a merger agreement with AaiPharma drew the ire of investors, who didn't think the price was high enough and who suspected that the offer was heavy on sweetheart arrangements for some of Cima's officers and directors. Except for possibly eliminating some duplicate corporate functions, Cephalon says it expects to "maintain" Cima's operations in Minnesota, which include about 275 employees in Eden Prairie and a new research and development facility and plant in Brooklyn Park. Since Cephalon will operate Cima as a separate division and fold some of its other drug-delivery projects into it, Cima has the potential to grow here, said Matt Arens, a senior research analyst with Kopp Investment Advisors, an Edina money management firm. Kopp owns about 1 million Cima shares, or a 6.8 percent stake. "If they are successful in growing Cima's product lines, Minnesota would benefit from that," Arens said. "I think they're unlikely to relocate manufacturing." Investors like the new deal for two reasons: It's higher than AaiPharma's offer and it's all cash, while AaiPharma's deal was in stock. "It's a fair offer," said Lance Helfert of West Coast Asset Management, also an investor in Cima's stock. Although neither Arens nor Helfert would rule out another bidder with a higher offer, they anticipate this merger deal will go through. Cephalon had previously offered $26 a share in cash, but Cima rejected that proposal to stick with AaiPharma, a Wilmington, N.C.-based maker of pain pills. Then the two started talking after Cephalon made it clear it was willing to sweeten its offer. Cima recently disclosed but did not identify a third suitor — widely speculated to be Endo Pharmaceuticals. "I doubt we'll hear more from Endo — they have some regulatory problems they are distracted with now," said Tony Green, an analyst at Craig-Hallum Capital. The Food and Drug Administration recently told Endo it needed to conduct more trials before the FDA could approve pill versions of two of Endo's painkillers. Cima would have to pay $16.25 million if it breaks up with Cephalon — about half again as much as the price for dumping its first suitor. Cephalon already has paid Cima's $11.5 million breakup fee to AaiPharma, the spurned suitor said Monday. Cima also would have to pay up to $5.5 million in Cephalon's merger-related expenses if it leaves the Pennsylvania company at the altar. With the purchase of Cima, Cephalon gains a technology that allows drugs to quickly dissolve in the mouth so patients can take pills without swallowing, Green said. Cima also is developing a product called OraVescent fentanyl, a fast-dissolving pill form of Cephalon's painkiller Actiq, a medicine to treat cancer pain that is delivered in the form of a lollipop. The merger eliminates a competitor and allows Cephalon a different way to sell the drug. As for AaiPharma, "We are eager to refocus our full energies on pursuing our growth strategy as an independent company," said president and CEO Phillip Tabbiner. Arens thinks Terry Glarner, the only Cima board member to vote against the AaiPharma deal, deserves credit for standing up for his company's shareholders. The Cephalon deal received unanimous approval from both company's boards. Unlike the AaiPharma deal, there do not appear to be any agreements to retain top officers and directors from Cima in the merged company, according to Cephalon's proxy filing. The deal was announced after the stock market was closed. Cima's shares ended trading Monday down 9 cents to $31.31, while Cephalon's shares were down 65 cents to $46.42. After hours, the Cephalon share price dropped another 59 cents to $45.83. twincities.com