Unilife Medical Solutions (OTC:UNIFF) is an emerging medical device manufacturer with business segments that include pre-filled syringes for pharmaceutical companies to deliver injectable medications, sharps safety devices for healthcare facilities, and contract manufacturing of medical devices.
More than two billion prefilled syringes are currently used each year on a global basis and pharmaceutical companies are making the switch to products such as Unilife's safety syringe which are compliant with needle-stick prevention laws (e.g. Federal Needlestick Prevention Act, 2000). Key differentiating features of Unilife's fully-integrated (within the barrel of the syringe) safety syringes include the following:
1.) a passive needle retraction system that is activated inside the body
2.) healthcare providers / shot administrators control the speed of needle retraction
3.) auto-disabling prevents re-use or tampering with used syringes
The market opportunity for prefilled syringes includes 50 drugs (primary anti-coagulant / hematology medications, vaccines, and other biological agents) that are delivered by injection, including an estimated 3 billion prefilled syringes in use by 2012. Unilife has a distinct advantage with a disruptive technology since there are currently no prefilled syringes to deliver medications with fully-integrated safety features so pharmaceutical companies must add these features - which adds to production / shipping costs and increases the overall packaging size by up to 60%, resulting in both waste disposal and marketing issues.
In mid-August, Unilife announced that it has commenced U.S. production of the Unitract™ 1mL Insulin Syringe at its FDA-registered manufacturing facility in Pennsylvania. The Company's automated assembly system is now rated at up to 90% of efficiency and Unilife will continue to work towards achieving the optimum productivity rate for this assembly system of about 40 million units per year. Unilife will now begin to build inventory to fulfill current and anticipated orders for its Unitract 1mL Syringes, which has already received key regulatory certifications for use in major markets such as the U.S. (FDA), Canada, Europe (CE Mark), and Australia.
Commercial release of the Unitract 1mL Syringes is expected to occur during 4Q09 once product aging studies have been completed and Unilife will promote the products at key industry events in the U.S. and Europe. Unilife is currently in discussions with a number of global pharmaceutical and healthcare companies that are interested in the Unitract 1mL Syringes. The Company also recently announced a pair of upcoming presentations at pharmaceutical trade shows in Europe to showcase its safety syringe technology and products.
The Company's strategic partner for exclusive manufacturing and distribution of sharps safety products is Shanghai Kindly Enterprise Development Group (KDL). This facility currently produces Unitract 1mL syringes and MedPro blood collection safety devices using semi-automated assembly systems developed and qualified by Unilife. KDL is the second largest medical device manufacturer in China and has two-thirds market share of the Chinese needle market, manufacturing over 5 billion needles and 600 million syringes per year. In addition, Unilife has a development agreement with PA-based West Pharmaceutical Services (NYSE:WST) for the provision of specialist components such as seals for Unitract products.
The key strategic business partner for Unilife is Sanofi-Aventis (NYSE:SNY), which is the largest buyer of pre-filled syringes in the world for injectable products such as the blood thinner Lovenox and influenza vaccines such as Fluzone marketed by the Company (Griffin Securities estimates that SNY purchases 40% of all pre-filled syringes on a global basis). Last July, Unilife and SNY agreed to a five-year exclusive licensing agreement for the Unilife Pre-Filled syringe. SNY is paying US$38M for the right to negotiate purchase of the RTFS (ready-to-fill syringe), consisting of fees and milestone-based industrialization payments with ongoing negotiations for exclusivity agreements by therapeutic class (e.g. blood thinners, vaccines, etc.).
The industrialization agreement with SNY for Unilife Ready-to-Fill Syringe (RTFS) announced mid-year allows Unilife to move forward with discussions that include other potential customers that are interested in the Company's prefilled syringes (with an additional agreement expected in early 2010). This key partnership with SNY provides Unilife with the necessary capital to expand its U.S. manufacturing capacity and will provide a major source of demand for the Company's pre-filled syringes by late 2010 with a production target of 40 million units per year at that time.
The program was originally intended to be completed by the end of 2011, but it is proceeding ahead of schedule so that both parties have agreed to bring its scheduled completion date forward to the end of 2010 (an entire year ahead of schedule). Unilife is scheduled to commence supply of the RTFS by the end of 2010. Initial supply of the RTFS by Unilife will utilize a fully automated assembly system that will have a targeted annual capacity of more than 40 million units. The design of this first line will also be used to develop a higher-volume automated assembly system scheduled to be completed by the end of 2011.
This high-volume automated assembly system is anticipated to have an annual production capacity greater than 100 million units and Unilife has a target production plan for the RTFS of about 400 million units per year beyond 2014. In addition, the centralization of RTFS production activities within Central PA is expected to occur in 2010 and will reduce the Company's operational costs, further optimize its supply chain activities, and place Unilife in a more favorable international location to supply the RTFS to all of its anticipated customers while leveraging the Company's strong, mutually beneficial relationship with the PA government due to the generation of high quality jobs in the state.
Earlier this week, Unilife announced this week that it has accepted a $5.2 million offer of assistance from the Commonwealth of Pennsylvania to support the creation of 241 new jobs within York County. The Company's expansion plans in Central PA include the proposed redomiciliation from Australia to the U.S., obtaining a NASDAQ listing for the stock, and the establishment of a major new global headquarters + manufacturing facility.
Unilife also announced this week that it has commenced the filing of international trademarks for Unifill™, which will become the market brand for its portfolio of ready-to-fill safety syringes. The product previously referred to on a pre-commercial basis as the Unilife Ready-to-Fill Syringe (or Unilife Prefilled Syringe) will now be marketed as the Unifill syringe. Unilife has developed the Unifill brand to help the Company effectively market its expanding range of injectable drug delivery products designed for use by pharmaceutical companies.
Last week, Unilife announced that CEO Alan Shortall 479,800 shares of the Company's stock on the open market at an average price of A$1.026 per share and the CEO has authorized his broker to purchase additional shares that will bring the total number of shares purchased to over 500,000. Mr. Shortall commented that he elected to purchase the shares in the open market rather than participate in the Company's recently announced private placement (conducted at a 7.7% discount to the market price at the time) as a sign of confidence to shareholders
In early October, Unilife announced an A$42.1M capital raise (consisting of an A$32.1M private placement to institutional investors + A$10M fully underwritten share purchase plan to existing, eligible shareholders at the same price of A$0.85 per share) to accelerate the expansion of its operational capabilities, production facilities, and equipment requirements in the U.S., in addition to completing the industrialization of the Unilife Ready-to-Fill Syringe. Unilife also plans to expedite the commercialization of additional pipeline products with other interested major pharmaceutical companies with whom the Company is currently in discussions. Finally, the proceeds of the capital raise will ensure adequate cash reserves leading to the redomiciliation in the U.S. and planned NASDAQ listing for the stock.
The Company announced that it received significant interest in recent months from both U.S. / Australian investors and other industry stakeholders for its strategic and operational strategies and the Board determined that it was in the best interests of shareholders to act upon this strong interest prior to its anticipated NASDAQ listing to ensure the Company has sufficient cash reserves to support and accelerate significant business expansion activities which it expects to undertake within the United States.
Since I first wrote about Unilife in early April, the US-listed Pink Sheet ADR (OTC:UNIFF) has experienced an exponential rise in both share price (from below 25 cents to the one dollar range) and trading volume as investors recognize the significant potential of the Company's niche strategy focused on safety syringes. The bullish sentiment by investors for Unilife is warranted given its disruptive safety syringe technology, relocation plans to the U.S. / NASDAQ stock listing next year, partnership with Sanofi, recent capital raise, and an additional deal expected next year.
Disclosure: No positions
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.