Pharma says acquisition is the right prescription.

• Author: Speizer, Irwin
• Position: Money Matters - AaiPharma Inc.

At a conference call in August to discuss their latest acquisition, executives of aaiPharma Inc. repeatedly used the word "synergy." But when it came time for questions, the second one was: Have you read what that analyst from Raymond James & Associates Inc. is saying?

Yes, everyone had read it, said Philip S. Tabbiner, president and CEO of the Wilmington-based drug company. He then went back to touting aaiPharma's merger with Eden Prairie, Minn.-based Cima Labs Inc. Most of the 14 analysts who cover aaiPharma (Nasdaq: AAII) liked the deal. But investors seemed to pay more attention to New York-based Michael Krensavage, the analyst who trashed it. He called it "an act of desperation suggesting that the company's current strategy is inadequate."

After the merger announcement, each company's stock price fell--aaiPharma 2% and Cima 3%--not the synergy aaiPharma executives had in mind. AaiPharma started out as a contract-research organization in 1986 but has transformed itself into a company that mostly buys mature drugs such as the pain reliever Darvocet and tries to extend their commercial life by improving and promoting them. Cima develops dosage methods, including a patented system for masking drug tastes. AaiPharma says Cima's technology can be applied to aaiPharma's drugs, and its marketing savvy can...