CIMA LABS Reports Record Third Quarter Operating Results; Full-Year 2002 Financial Guidance Increased Due to Outlook for Strong Fourth Quarter.

Business Editors

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Oct. 31, 2002

CIMA LABS INC. (Nasdaq:CIMA) today reported record operating results for the third quarter of 2002 ended September 30:

-- Operating revenues totaled $12.5 million, an increase of 42% from $8.8 million in the year-earlier period and up 23% from $10.2 million in this year's second quarter.

-- Operating income totaled $2.3 million, an increase of 107% from $1.1 million in the third quarter of 2001 and up 18% from $2.0 million in this year's second quarter.

-- Net income increased 14% to $4.4 million or $0.30 per diluted share, from $3.8 million or $0.24 per diluted share a year ago. Third quarter net income was also up 5% from $4.2 million or $0.28 per diluted share in this year's second quarter.

John M. Siebert, Ph.D., president and chief executive officer, commented: "CIMA's excellent third quarter performance was driven by strong operating contributions from each component of our business. CIMA shipped a record number of fast-dissolve tablets; royalty income reflects the accelerating growth in our partners' sales of fast-dissolve products; and record levels of product development fees and licensing revenues are indicative of the magnitude and value of our product development pipeline. During the third quarter, we announced a major collaborative agreement with Aventis Pharmaceuticals, Inc. to develop a fast-dissolve version of Allegra (fexofenadine), one of the leading non-sedating antihistamines on the market today. Our relationship with Aventis follows announcements earlier this year of new collaborations with Schering-Plough and Wyeth. We believe our increasingly successful strategy of developing important new fast-dissolve products in collaboration with major pharmaceutical companies sets the stage for progressively stronger operating results over the next few years."

John Hontz, Ph.D., chief operating officer, said, "During the third quarter, development was completed on several projects in our product development pipeline. Over the next three to nine months, we expect to add several new partner-funded feasibility projects to our product development pipeline. During the fourth quarter, we will ship to Wyeth pre-launch supplies of DuraSolv(R) loratadine, a pharmaceutical equivalent to Claritin(R) RediTabs(R). One to two additional product introductions are possible during 2003, followed by another three to five in 2004. In addition, clinical trials on OraVescent(R) fentanyl, one of our proprietary products, commenced in the third quarter. "

Financial Review

Sales of fast-dissolve products that CIMA manufactures for its partners rose 13% in this year's third quarter from the year-earlier period and by 31% from this year's second quarter. Sales of CIMA's branded prescription products accounted for 76% of total third quarter product sales, up from 36% in last year's third quarter. As expected, third quarter sales of OTC products increased from this year's second quarter and are expected to grow further in the fourth quarter. It is anticipated that total product sales should reach a new record level in this year's fourth quarter.

CIMA receives product development fees and licensing revenues from its collaborative partners. Reflecting the year-over-year growth in CIMA's product development pipeline, this revenue category rose 64% in this year's third quarter in comparison to the year-earlier period. This revenue category, which was also up 6% from this year's second quarter, varies between quarters primarily due to the timing of scheduled milestone payments.

CIMA's partners pay royalties based on their sales of the fast-dissolve products manufactured by the Company. Reflecting the continued growth of our partners' sales, royalty revenues rose 118% in this year's third quarter in comparison to the year-earlier period and by 28% from this year's second quarter. Royalties accounted for 26% of third quarter operating revenues, compared to 25% in this year's second quarter and 17% in the third quarter of 2001. Further growth in royalty revenues is anticipated as the branded prescription products introduced primarily in 2001 become increasingly established in their therapeutic categories and geographic markets. It is anticipated that this growth will be augmented in 2003 by Wyeth's sales of DuraSolv loratadine, as well as additional market launches later in that year.

R&D expense increased 119% to $3.4 million, or 27% of total operating revenues, in the third quarter of 2002, from $1.5 million, or 18% of total operating revenues, in the year-earlier quarter. R&D expense was also up 36% from $2.5 million, or 24% of total operating revenues, in this year's second quarter. For full-year 2002, R&D expense related to CIMA's proprietary products is expected to amount to approximately $1.0 million, of which approximately $700,000 was incurred during the first nine months of this year.

Selling, general and administrative expense increased 51% to $1.8 million, or 15% of total operating revenues, in this year's third quarter, from $1.2 million, or 14% of total operating revenues, in the third quarter of 2001. SG&A expense was down 5% from $1.9 million, or 19% of total operating revenues, in this year's second quarter.

Operating income increased 107% to $2.3 million in this year's third quarter from $1.1 million in the third quarter of 2001. For the first nine months of 2002, operating income increased 84% to $5.8 million from $3.1 million in the comparable nine-month period of 2001.

Since turning profitable in the fourth quarter of 1999, CIMA has not incurred income tax expense due to the recognition of approximately $13.1 million of U.S. tax credits carried over from the years when the Company was not profitable. Without these credits, CIMA's cumulative tax expense for this period of time would have been approximately $11.9 million, based on a tax rate of 40%. For the first nine months of 2002, the Company has reported a $1.1 million bottom-line tax benefit. CIMA expects to recognize its remaining tax benefits in the fourth quarter of 2002.

Cash and available-for-sale securities totaled $140.7 million at the end of this year's third quarter, down from $149.5 million at the end of 2001. For the third quarter and first nine months of 2002, cash of $9.4 million and $26.9 million, respectively, was used to fund capital expenditures supporting expansion of R&D and manufacturing capacity. These growth-related capital expenditures are expected to total approximately $37.0 million to $39.0 million in 2002, up from prior estimates of approximately $35.0 million. Due to these uses of cash, as well as lower interest rates on cash reserves, other income, principally investment income on cash reserves, declined to $1.4 million in this year's third quarter from $2.7 million in the year-earlier period and from $1.9 million in this year's second quarter.

Fourth Quarter/Full-Year 2002 Guidance

For the fourth quarter of 2002 ending December 31, CIMA expects earnings of $0.41 to $0.44 per diluted share on operating revenues of $14.0 to $15.0 million. Reflecting the strength of CIMA's operations, operating income is expected to be in the range of $3.2 to $3.7 million. As a result, CIMA is raising its full-year earnings forecast to $1.23 to $1.26 per diluted share on operating revenues of $45.0 to $46.0 million, operating income in the range of $9.0 to $9.5 million and an estimated bottom-line tax benefit of $2.0 to $2.5 million. The timing of milestone payments from partner-funded product development collaborations, the rate of spending on infrastructure initiatives and taxes will affect where operating revenues and earnings fall within these targeted ranges. Consistent with its prior practice, the Company will present financial guidance for 2003 in its press release announcing fourth quarter operating results in February.

About CIMA LABS

CIMA develops and manufactures prescription and over-the-counter products based upon its proprietary, fast-dissolve drug delivery technologies, OraSolv(R) and DuraSolv(R). Based on our technologies, an active drug ingredient, which we frequently taste-mask, is formulated into a new, orally disintegrating dosage form that dissolves quickly in the mouth without chewing or the need for water. CIMA's business involves a dual operating strategy. We develop and manufacture fast-dissolve versions of drugs for pharmaceutical company partners for whom we currently produce three branded prescription pharmaceuticals and two over-the-counter brands. CIMA is also developing proprietary products utilizing our fast-dissolve technologies, as well as our new OraVescent(R) enhanced absorption, transmucosal drug delivery system.

Cautionary Statement

This press release, including the information related to CIMA's expectations about earnings and revenues, new product development agreements, new product introductions, marketing efforts of third parties, sources of future revenues, other income, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 CIMA's products, the receipt of firm orders for CIMA's products, the success of pharmaceutical companies in marketing CIMA's products, 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, and returns on investments. 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.

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               Third Quarter Conference Call and Replay

    CIMA Labs will review its third quarter operating results in a
conference call at 4:30 PM Eastern today. Investors can listen to the
conference call at www.cimalabs.com or www.vcall.com. Listeners should
go to one of these web sites at least 15 minutes before the scheduled
start time to download and install any necessary audio software. For
those who cannot listen to the live webcast, a replay will be
available shortly after the teleconference at the Vcall web site. A
replay of the conference call also will be available through November
7 at 719-457-0820 and providing the 511345 confirmation code.


                  CONDENSED STATEMENTS OF OPERATIONS
                   (in thousands, except per share)

                              (Unaudited)            (Unaudited)
                         For the 3 Months Ended For the 9 Months Ended
                         ---------------------- ----------------------
                         September   September   September   September
                             30,         30,         30,        30,
                            2002        2001        2002       2001
                         ----------- ---------- ------------ ---------
Operating Revenues:
  Net sales                  $6,094     $5,376      $14,970   $13,273
  Product development
   fees and licensing         3,242      1,972        8,610     5,883
  Royalties                   3,205      1,469        7,544     3,676
                         ----------- ---------- ------------ ---------
Total operating revenues     12,541      8,817       31,124    22,832

Operating expenses:
  Cost of goods sold          4,997      4,930       12,165    11,648
  Research and product
   development                3,388      1,549        7,927     4,399
  Selling, general and
   administrative             1,839      1,220        5,259     3,648
                         ----------- ---------- ------------ ---------
Total operating expenses     10,224      7,699       25,351    19,695

Operating income              2,317      1,118        5,773     3,137

Other income                  1,449      2,685        5,126     7,572
                         ----------- ---------- ------------ ---------

Income before provision
 for taxes                    3,766      3,803       10,899    10,709
Income tax expense
 (benefit)                     (617)       (38)      (1,056)      196
                         ----------- ---------- ------------ ---------

Net income                   $4,383     $3,841      $11,955   $10,513
                         =========== ========== ============ =========

Net income per basic
 share                         $.31       $.26         $.84      $.72
                         =========== ========== ============ =========

Net income per diluted
 share                         $.30       $.24         $.82      $.68
                         =========== ========== ============ =========

Weighted average of
 number of shares:
  Basic                      14,209     14,715       14,172    14,564
  Diluted                    14,598     15,699       14,598    15,557


                     SELECTED BALANCE SHEET DATA
                            (in thousands)

                                         September 30,   December 31,
                                              2002           2001
                                          (Unaudited)     (Audited)
                                         -------------- --------------
Cash, cash equivalents and available-for-
    sale securities - Current and
     Noncurrent                              $ 140,688      $ 149,505
Trade accounts receivable, net                  10,243          8,963
Inventories, net                                 3,340          3,771
Property, plant and equipment, net              52,466         27,761
Deferred tax assets, net                         9,475          6,200
Total Assets                                   218,395        198,931
Current liabilities                             11,919          4,154
Stockholders' Equity                           206,476        194,777