Spurned in a takeover offer earlier this month,

Cephalon

(CEPH)

is trying another approach to lure

Cima Labs

(CIMA)

away from its planned merger with

aaiPharma

(AAII)

.

When we last left

the three players, Cima had rejected on Sept. 2 Cephalon's $26-a-share cash bid to break up the proposed marriage between Cima and aaiPharma that had been announced in early August. At the time, the stock-swap merger would have been worth $24.61 to Cima shareholders.

But since Aug. 21, when Cephalon made its bid, Cima's shares have never traded below $26. And they continued rising Thursday after Cima made public a new offer from Cephalon.

Cephalon didn't offer more money, but it expressed a willingness to modify its proposal to include a combination of stock and cash. "We remain flexible with our offer and strongly believe that we can negotiate a proposal that could result in a superior outcome for Cima shareholders," said Frank Baldino Jr., Cephalon's chairman and chief executive, in a Sept. 10 letter to Cima's chairman, Steven B. Ratoff.

Cima said Thursday that its board would consider the offer. The response from aaiPharma was similar to its response the first time Cephalon made a run at Cima. "We believe the merger between aaiPharma and Cima Labs will create a combined company with tremendous growth potential," said Dr. Philip S. Tabbiner, president and CEO of aaiPharma, in a prepared statement.

Neither aaiPharma nor Cima has issued formal merger documents; the companies haven't set dates for shareholders to vote on the merger. Three lawsuits by Cima shareholders have been filed, complaining that Cima's dismissal of Cephalon's first bid or other alternatives had hurt shareholders. Cima said it would "vigorously contest" the lawsuits.

Cephalon's willingness to offer some stock would neutralize some of aaiPharma's contention that its proposal is better for Cima shareholders because their investment could grow over time instead of being capped at $26 a share.

The merger terms call for Cima shareholders to get 1.3657 shares in the combined company for each Cima share they own. Analysts have noted that aaiPharma's heavy debt load most likely would preclude the company from improving its offer.

By last week, that exchange ratio didn't look so good. As Cima continued to trade above Cephalon's $26-a-share bid, the value of aaiPharma's shares not only trailed Cima's market price but also trailed Cephalon's offering price.

But some things have changed, at least temporarily, thanks to aaiPharma's announcement Thursday that it has received approval by the Food and Drug Administration to market a form of the painkiller Darvocet. The Wilmington, N.C.-based aaiPharma said the drug will be used by patients with mild to moderate pain, adding that the drug should be available next month.

The news sent aaiPharma's stock up 6.7%, or $1.21, to trade at $19.39 by midafternoon. The stock rose as high as $20.15.

More importantly for aaiPharma's merger promotion, its shares are now worth -- when multiplied by the merger exchange ratio -- $26.48 a share. That's better than Cephalon's first offer.

However, that's still less than the value of Cima's shares, which rose 2.2%, or 61 cents, to $27.86 by midafternoon. The stock rose as high as $28.73.

The more Cima's stock rises, the more Wall Street speculates that another company might enter the picture. Cephalon's stock was up 1.5%, or 69 cents, to $48.30 in midafternoon trading.

Cephalon, based in West Chester, Pa., likes Cima for that company's research on drug delivery systems and, most notably, its work on an experimental product, OraVescent Fentanyl, a form of the narcotic analgesic fentanyl for cancer pain. Cephalon makes and markets Actiq, a version of fentanyl in lollipop form.

Cima, based in Eden Prairie, Minn., is attractive to aaiPharma for its drug delivery research as well as some $134 million in cash that would provide welcome relief for aaiPharma's balance sheet.