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When it comes to complicated deals, as well as baseball, it's best to refer to that famous philosopher Yogi Berra, who once remarked "It ain't over 'til it's over."

The same could be said for the evolving relationship among three medical companies --




Cima Labs






Four weeks ago, Cima and aaiPharma said they would merge. But on Aug. 21, Cephalon made a bid to buy Cima. And on Sept. 2, Cima rejected Cephalon's bid.

Analysts who follow the three companies said they doubt the merger will proceed under its original terms. Some think Cephalon or another company will top Cephalon's takeover bid of $26 a share for Cima, primarily because Cima's stock has been trading above that figure ever since Cephalon expressed an interest.

Some suggest aaiPharma, whose shareholders would have the controlling stake in the new company, might have to improve the terms of its proposal in which Cima shareholders would get 1.3657 shares in the new company for each Cima share. But aaiPharma has said it won't change the exchange ratio.

"The market is telling us that something will happen," said Anthony K. Green, a Cima Labs analyst at Craig-Hallum Capital in Minneapolis. He notes that there is enough of a gap between Cima's stock price and the price of aaiPharma's shares multiplied by the exchange ratio to keep arbitrageurs intrigued.

By midafternoon Friday, Cima Labs was trading at $27.08 and aaiPharma was trading at $18.20. Multiply aaiPharma's stock price by the exchange ratio and you get $24.86 a share.

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Cima's stock price has traded above $26 a share every day since the takeover bid was announced -- and remained above that price after Cima rejected Cephalon's bid.

"The $26 floor is no longer there," said Green, who dropped his rating on Cima to neutral from buy after the merger was announced. He said Cephalon might make a higher bid or that some generic drug company or specialty drug company could enter the fray.

"We would advise our clients to take whatever the market is offering," he added. "Maybe you can hold out for $28 or $30 a share, but it's time to move on to better opportunities." He doesn't own Cima shares and doesn't cover the other companies. His firm is a market maker in Cima's stock.

A Cephalon spokesman declined to comment. Calls to Cima and aaiPharma were not returned.

Cima, based in Eden Prairie, Minn., recorded $46.6 million in revenue last year. Its specialty is creating drug delivery systems that enable patients to ingest drugs without having to chew the products or take them with water. It has forged partnerships with several companies for making easier-to-swallow versions of prescription and over-the-counter drugs. It also is testing its own product, OraVescent Fentanyl, a form of the narcotic analgesic fentanyl, which is used in treating cancer pain.

Cephalon, of West Chester, Pa., reported $506.9 million in revenue last year. Its two major products -- Provigil, for narcolepsy and other sleep disorders, and Actiq, a type of fentanyl -- accounted for about two-thirds of sales.

And aaiPharma, based in Wilmington, N.C., had sales of $230.5 million last year. It is a contract manufacturer for some drug companies, and it also makes and sells its own drugs for pain management, critical care and gastrointestinal diseases.

aaiPharma's stock, which drifted downward after the merger with Cima, has been moving up slightly since Cephalon made its takeover bid for Cima.

"It's still not clear to me," said David Windley, who follows aaiPharma for Jefferies & Co. "I can't figure out who's buying the stock."

Windley, who doesn't cover Cima or Cephalon, said he could understand speculators' seeking to buy Cima in hopes of a better offer, adding that maybe some investors are trying to play aaiPharma temporarily.

Windley doesn't like the merger, saying that Cima and aaiPharma "both have revenue challenges for the next few quarters." He said "the energy spent by" aaiPharma and Cima in promoting the merger during the last few weeks "was unusually high."

Windley rates aaiPharma as a hold. He doesn't own shares, but his firm makes a market in the drug company's stock.

Meanwhile, Cima has been hit with three shareholder lawsuits -- all filed in Delaware, where Cima is incorporated -- complaining that the company failed to fulfill its fiduciary duties to shareholders by rejecting the Cephalon offer and/or seeking the best alternatives.

Cima rejected the Cephalon offer on Sept. 2, saying the bid "does not represent a superior proposal" to the merger. Cima and aaiPharma officials have said that the stock swap merger gives shareholders a better chance for a higher future investment than the one-shot cash offer from Cephalon.

Cephalon said on Sept. 2 that it was "baffled" by Cima's decision, adding, "It is hard to imagine how refusing to negotiate with us is in the best interests of Cima shareholders."

Jim Birchenough, who follows Cephalon for Lehman Brothers, said that if someone makes a higher bid for Cima he doubts it would be Cephalon. "Based on their past history, I don't think they'll 'up' their offer," he said. "They tend to be patient and wait things out."

He said Cephalon could wait until the Cima and aaiPharma shareholders vote on the merger, the dates of which have not been set. If the merger is rejected, he added, then Cephalon might make its next move. Birchenough, who doesn't track Cima or aaiPharma, has a neutral rating on Cephalon. He doesn't own shares, and his firm doesn't have an investment banking relationship with Cephalon.