CIMA Labs Inc. might have became a somewhat more attractive takeover subject for Cephalon Inc. by starting enrollment in a Phase III study with its OraVescent Fentanyl a little ahead of schedule, although the company reported a dip in revenues for the first quarter and a significant dent in operating income at the same time it announced the trial's start.
CIMA's stock (NASDAQ:CIMA) fell 36 cents Friday to close at $31.34.
Revenue guidance for the first quarter had been "essentially on target," said James Hawley, chief financial officer for CIMA, during a conference call.
Regarding the Phase III study, originally planned for the second quarter, the company "built conservatism into our R&D forecast in the event we were able to begin enrolling patients in the first quarter," he said. "As it turned out, we began enrollment at the very end of the quarter, but didn't start enrolling patients in greater numbers until April."
Steven Ratoff, president and interim CEO for the company, said CIMA is "moving forward on the growth curve that we envisioned for CIMA when we launched our dual operating strategy nearly three years ago," and noted the company had warned that the first quarter of 2004 would be "challenging."
OraVescent Fentanyl, for breakthrough cancer pain, would complement Cephalon's marketed therapy for the condition, Actiq (oral transmucosal fentanyl citrate) - which, with generic versions on the horizon, hardly needed competition from the CIMA compound.
In November, West Chester, Pa.-based Cephalon Inc. made a $515 million offer for CIMA, of Eden Prairie, Minn., and the pair entered a definitive agreement, putting the kibosh on an effort by aaiPharma Inc., a specialty pharmaceutical firm in Wilmington, N.C., to take CIMA. (See BioWorld Today, Nov. 5, 2003.)
Cephalon and CIMA disclosed in late January that the FTC asked for more information about the merger, which extended the waiting period. Ratoff said CIMA is "not providing any information" about the FTC process, but has mostly completed its part and is standing ready. He noted that Cephalon has said in its conference call that the company "still expect[s] the deal to close in the second quarter."
Ratoff said he feels the same. If the deal falls through, the company has enough money to keep going and "take our time in finding a partner," he said. Cash and available-for-sale securities totaled $115.3 million at the end of the first quarter, compared with $110.2 million at the end of the same quarter last year.
CIMA said revenues added up to $15.7 million, compared with $16.7 million for the same period last year. Operating income was $198,000, compared with $3.9 million last year. The tally included $1.2 million in expenses related to the merger.
Chalking up a combined sales hike of $2 million were Remeron SolTabs and Zomig ZMT. The overall drop in revenue was due to a decline in sales of Alavert, an over-the-counter fast-dissolve formulation of Claritin RediTabs developed for Madison, N.J.-based Wyeth, which was shipping launch-scale quantities a year ago.
Remeron SolTab is the fast-dissolving version of the antidepressant mirtazapine, which CIMA developed and manufactured for the Netherlands-based NV Organon. The drug did well despite generic competition in the U.S., which could mean Organon's efforts in Europe are working.
Zomig ZMT (zolmitriptan) is a migraine treatment partnered with UK-based AstraZeneca plc. The drug is expected to pull in less revenue because AstraZeneca has decided to move it to an independent distributor, which means the selling price on which CIMA gets royalties will go down.
In fact, full-year revenues for the partner-based products likely are to decline across the board, CIMA said.
A regulatory submission for OraVescent Fentanyl is due in 2005, by which time the merger with Cephalon is expected to be completed, with a shareholders' meeting to vote slated for June 15, although that could be moved if necessary. Had the merger deal not been signed, Hawley said, CIMA probably would have out-licensed OraVescent Fentanyl, too - a move that would have "more than offset this decline."
John Hontz, chief operating officer, said the company foresees four to six partner-based product launches in 2005. CIMA has 16 such products in all, 11 of which have been announced so far.
"We continue to believe the majority of the 16 could launch before the end of 2006," he said.