-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UBLdAn77KJgbPbkFMfyAywoTrcJLcn5P7/Od6Rjf47b/n6jPx0Knfwft9Bg1B3Fm rzc9+yI5jNzDFNB4LIM72w== 0001157523-04-001865.txt : 20040226 0001157523-04-001865.hdr.sgml : 20040226 20040226160541 ACCESSION NUMBER: 0001157523-04-001865 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040226 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIMA LABS INC CENTRAL INDEX KEY: 0000833298 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 411569769 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24424 FILM NUMBER: 04630854 BUSINESS ADDRESS: STREET 1: 10000 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-9361 BUSINESS PHONE: 9529478700 MAIL ADDRESS: STREET 1: 10000 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-9361 8-K 1 a4582225.txt CIMA LABS INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 February 26, 2004 ------------------------------------------------------ Date of report (Date of earliest event reported) CIMA LABS INC. -------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 0-24424 41-1569769 - ------------------------- ----------------------- ---------------------- (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 10000 Valley View Road Eden Prairie, Minnesota 55344-9361 --------------------------------------------------- (Address of Principal Executive (Zip Code) Offices) (952) 947-8700 ----------------------------------------------- (Registrant's Telephone Number, Including Area Code) ================================================================================ Item 7. Financial Statements and Exhibits. (c) Exhibits. The following exhibit is being furnished pursuant to Item 12 "Results of Operations and Financial Condition" of this Form 8-K: 99 Press Release dated February 26, 2004. Item 12. Results of Operations and Financial Condition. On February 26, 2004, CIMA LABS INC. issued a press release, a copy of which is being furnished as an exhibit to this report and is incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: February 26, 2004 CIMA LABS INC. By /s/ James C. Hawley --------------------------------------- James C. Hawley Vice President, Chief Financial Officer and Secretary M1:1077313.01 EX-99 3 a4582225-ex99.txt CIMA LABS INC. PRESS RELEASE 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 -----END PRIVACY-ENHANCED MESSAGE-----