SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended June 30, 1995 Commission file number 0-3390
UNIMED PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
22-1685346
DELAWARE (I.R.S. Employer
(State or other Identification Number)
jurisdiction of incorporation or
organization)
2150 E. Lake Cook Rd., Buffalo 60089
Grove, Illinois (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number (708) 541-2525
including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes X No.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:
Title of each class Number of shares outstanding
Common Stock 6,129,411
($.25 par value)
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Page Number
PART I. Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of 5
Operations
Consolidated Statements of 6
Cash Flows
Notes to Consolidated 7
Financial Statements
ITEM 2. Management's Discussion and 8
Analysis of Results of Operations and
Financial Condition
PART II. Other Information 11
SIGNATURE PAGE 12
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
1995 1994
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 6,356,812 $ 6,101,093
Short-term investments 505,165 511,363
Receivables:
Trade 958,318 1,086,298
Other 56,889 61,947
Total receivables 1,015,207 1,148,245
Inventories 4,642,918 2,433,561
Prepaid expenses and other 266,850 338,412
Total current assets 12,786,952 10,532,674
Leasehold improvements and equipment 2,021,937 2,032,546
Less accumulated depreciation and 1,027,752 934,916
amortization
Net 994,185 1,097,630
Other 806,729 174,477
Total assets $ 14,587,866 $ 11,804,781
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
1995 1994
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 155,833 $ 90,107
Accrued liabilities 308,913 352,234
Income taxes payable - - - 9,963
Due to Roxane 4,400,834 1,881,916
Total current liabilities 4,865,580 2,334,220
Stockholders' equity:
Common stock, $.25 par value;
authorized 12,000,000 shares;
issued and outstanding: 6,129,411 1,532,353 1,531,790
and 6,127,161
Additional paid-in capital 17,058,285 17,052,661
Accumulated deficit (8,909,105)
(9,152,931)
Accumulated foreign currency 40,753 39,041
translation adjustment
Total stockholders' equity 9,722,286 9,470,561
Total liabilities and stockholders' $ 14,587,866 $ 11,804,781
equity
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales $ 1,974,520 $ 1,971,207 $ 3,962,267 $ 3,708,036
Cost of sales 1,040,677 878,462 2,064,699 1,677,675
Gross profit 933,843 1,092,745 1,897,568 2,030,361
Operating and administrative 516,135 598,768 1,095,686 1,241,463
expenses
Sales and marketing expenses 272,449 657,643 542,912 1,323,559
Research and development 129,390 83,020 243,378 157,145
expenses, net
Income (loss) from operations 15,869 (246,686) 15,592 (691,806)
Interest income 117,716 47,722 219,934 104,085
Income (loss) before income 133,585 (198,964) 235,526 (587,721)
taxes
Income tax benefit - - - - - - 8,300 - - -
Net income (loss) $ 133,585 $ (198,964) $ 243,826 $ (587,721)
Net income (loss) per share $ .02 $ (.03) $ .04 $ (.10)
Weighted average number of
common and 6,836,961 6,127,161 6,734,804 6,127,161
common equivalent shares
outstanding
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994
(Unaudited)
Six Months Ended
June 30
1995 1994
Cash flows provided by (used in)
operations:
Net income (loss) $ 243,826 $ (587,721)
Adjustments to reconcile net income
(loss) to net cash
provided by operations:
Depreciation and amortization 92,836 96,489
Other 1,712 - - -
Decrease (increase) in current 133,038 (20,156)
receivables
Decrease in notes receivable - - - 35,032
(Increase) in inventories (2,209,357) (682,891)
Decrease in prepaid expenses and other 71,562 89,173
Increase (decrease) in payables and 12,442 (83,421)
accrued liabilities
Increase in due to Roxane 2,518,918 846,891
Net cash provided by (used in) 864,977 (306,604)
operating activities
Cash flows (used in) investing
activities:
Sale (purchase) of equipment 10,609 (104,399)
Net sale of short-term investments 6,198 - - -
Investment in Romark Laboratories, L.C. (500,000) - - -
Investment in Medisperse - - - (82,985)
Net cash (used in) investing (483,193) (187,384)
activities
Cash flows (used in) financing
activities:
Proceeds from issuance of stock 6,187 - - -
Issuance of note receivable (132,252) - - -
Net cash (used in) financing (126,065) - - -
activities
Increase (decrease) in cash and cash 255,719 (493,988)
equivalents
Cash and cash equivalents at beginning of 6,101,093 5,328,145
period
Cash and cash equivalents at end of $ 6,356,812 $ 4,834,157
period
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 1,663 $ - - -
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
NOTE 1
The consolidated financial information herein is unaudited, other than the
Consolidated Balance Sheet at December 31, 1994, which is derived from the
audited financial statements. The unaudited interim financial statements
include the accounts of UNIMED Pharmaceuticals, Inc. (the "Company"), its
wholly-owned subsidiaries, Unimed Canada, Inc. and Unimed Technology
Management, Inc.
In the opinion of the Company, the accompanying unaudited interim
consolidated financial statements contain all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
consolidated financial position as of June 30, 1995, the results of
operations for the three and six months ended June 30, 1995 and 1994 and
changes in cash flows for the six-month period ended June 30, 1995 and 1994.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes included in the Company's 1994 annual report on Form
10-K filed with the Securities and Exchange Commission.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Six Months Ended June 30, 1995 vs. Six Months Ended June 30, 1994
Net sales of the Company for the six months ended June 30, 1995 of
$3,962,267 were $254,231 or 7% higher than net sales of $3,708,036 for the
six months ended June 30, 1994. The Company's net income was $243,826 or
four cents per share for the six months ended June 30, 1995. Net loss for
the six months ended June 30, 1994 was $587,721 or ten cents per share.
Marinol[R] (dronabinol) sales increased $353,353 or 12% to $3,294,060, due
to increased demand in the HIV market and a price increase.
Serc[R] (betahistine HCl) sales increased $12,441 or 3% to $499,557 for the
six months ended June 30, 1995 due to a combination of increased Serc[R]
sales in Canada and a slight decrease in sales volume from foreign
contracts.
Interest income increased to $219,934 in the six month period ended June 30,
1995, $115,849 higher than in the six month period ended June 30, 1994
primarily due to higher interest rates and higher invested cash balances.
Cost of sales increased by $387,024 for the six month period ended June 30,
1995 compared to the six month period ended June 30, 1994, or an increase
of 23%. Cost of sales expressed as a percent of sale increased 15% over the
same period in 1994. The increase in cost of sales is principally due to
higher volume and to establishing a provision for Marinol[R] royalty
payment adjustments associated with Medicaid rebates paid by the Company's
distributor, Roxane Laboratories, Inc.
Operating and administrative expenses decreased in the six month period
ended June 30, 1995 by $145,777 or 12%. As a percentage of net sales,
operating and administrative expenses decreased 17%. This decrease was a
result of discontinuing active marketing of the OTC products.
Sales and marketing expenses decreased $780,647 or 59% in the six month
period ended June 30, 1995. As a percentage of net sales, sales and
marketing expense decreased 62%. The six month period ended June 30, 1994
included significant advertising and promotional expenditures associated
with the OTC product line. Early in 1995, the Company elected to
discontinue the OTC product line and to concentrate on current prescription
products and new proprietary pharmaceutical development. The Company
eliminated advertising, promotion, direct mail and telemarketing operations
associated with the OTC product line, and is concentrating sales and
marketing activities on promotion of Marinol[R] through its dedicated
HIV/AIDS specialty sales force.
Net research and development expenses in the six month period ended June 30,
1995 were $243,378 as compared to $157,145 in the six month period ended
June 30, 1994 primarily due to increased spending on Phase IV Marinol[R]
clinical trials. Marinol[R] clinical trial expenses are shared by the
Company's distributor. As a percentage of net sales, research and
development costs were 6% as compared to 4% in the six month period ended
June 30, 1994. The Company expects research and development expenses to
increase following implementation of its in-licensing program. The Company
began implementing this program when it recently announced that it licensed
a new product, Nitazoxanide (NTZ), which treats a broad spectrum of
parasitic infections.
In late 1994, the Company announced it will focus its resources on further
development of existing prescription products and that it will seek to
acquire and develop complementary late stage development compounds which
have the potential to be marketed in concentrated niche markets. The
Company believes that its sales and marketing expertise, its experience in
development of new products, and its knowledge of and contacts within the
pharmaceutical industry will help to expand its development pipeline and
future new product introductions.
Three Months Ended June 30, 1995 vs. Three Months Ended June 30, 1994
Net sales of the Company for the three months ended June 30, 1995 of
$1,974,520 were slightly higher than net sales of $1,971,207 for the three
months ended June 30, 1994. The Company's net income was $133,585 or two
cents per share for the three months ended June 30, 1995. Net loss for the
three months ended June 30, 1994 was $198,964 or three cents per share.
Marinol[R] (dronabinol) sales increased 5% to $1,641,468, due to increased
demand in the HIV market and a price increase.
Serc[R] (betahistine HCl) sales decreased $9,551 or 3% to $270,797 for the
three months ended June 30, 1995 due to decreased sales volume from foreign
contracts.
Interest income increased to $117,716 in the three month period ended June
30, 1995, $69,994 higher than in the three month period ended June 30, 1994
primarily due to higher interest rates and higher invested cash balances.
Cost of sales increased by $162,215 for the three month period ended June
30, 1995 compared to the three month period ended June 30, 1994, or an
increase of 18%. The increase in cost of sales is principally due to
establishing a provision for Marinol[R] royalty payment adjustments
associated with Medicaid rebates paid by the Company's distributor, Roxane
Laboratories, Inc.
Operating and administrative expenses decreased in the three month period
ended June 30, 1995 by $82,633 or 14%. As a percentage of net sales,
operating and administrative expenses decreased 14%. This decrease was a
result of discontinuing active marketing of the OTC products.
Sales and marketing expenses decreased $385,194 or 59% in the three month
period ended June 30, 1995. As a percentage of net sales, sales and
marketing expense decreased 59%. The three month period ended June 30, 1994
included advertising and promotional expenditures associated with the OTC
product line. In early 1995, the Company eliminated advertising, promotion,
direct mail and telemarketing operations associated with the OTC product
line, and is concentrating sales and marketing activities on promotion of
Marinol[R] through its dedicated HIV/AIDS specialty sales force.
Net research and development expenses in the three month period ended June
30, 1995 were $129,390 as compared to $83,020 in the three month period
ended June 30, 1994 primarily due to increased spending on Phase IV
Marinol[R] clinical trials. The Company expects research and development
expenses to increase following implementation of its in-licensing program.
Liquidity
At June 30, 1995, the Company had cash, cash equivalents and short-term
investments of $6,861,977, compared to $6,612,456 at December 31, 1994, an
increase of $249,521. On a year-to-year basis, comparing June 30, 1995 with
the same date in 1994, cash and cash equivalents increased by $1,260,199.
The Company generated net cash from operations totaling $864,977 for the six
month period ended June 30, 1995. Inventories increased by $2,209,357 or
91% for the six month period ended June 30, 1995, as the Company accepted
annual delivery of Delta-9 tetrahydrocannabinol, the active component in
Marinol[R], from its contract manufacturer. Marinol[R] constitutes
approximately 90% of total inventory and 33% of total assets. Marinol[R]
inventories normally are depleted throughout the year until delivery of the
new annual production lot.
The Company's distributor advances funds to the Company required to maintain
Marinol[R] inventories. During the six month period ended June 30, 1995,
the distributor advanced the Company approximately $2,500,000. The current
liability, Due to Roxane, is relieved on a quarterly basis from royalties
remitted to the Company. The reduction in the quarterly royalty payment
corresponds to the cost of Marinol[R] inventory sold during the quarter.
The Company expects to further increase Marinol[R] bulk inventory levels,
via the 1995 production run, in order to replace current consumption and
maintain adequate safety stocks.
In June 1995, the Company began implementing its new in-licensing strategy
when it announced that it licensed a new product, Nitazoxanide (NTZ), which
treats a broad spectrum of parasitic infections. Upon signing the license
agreement with Romark Laboratories, L.C., the Company invested $500,000 in
Romark in exchange for a 5% equity interest. The Company will invest as
much as an additional $500,000 in Romark in exchange for a further 5% equity
interest upon attainment of certain development milestones relating to NTZ.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior None
Securities
Item 4. Submission of Matters to Vote
of Security Holders
On April 28, 1995, at the Annual Meeting of Stockholders,
the Stockholders elected one Outside Director and re-
elected one Outside Director. The results of the
shareholder vote are shown below.
Abstention Broker
For Against s/ Non-
Withheld votes
Fred Holubow 4,810,559 0 454,277 0
James J. Lempenau 4,810,759 0 454,077 0
Item 5. Other Information None
Item 6. Exhibits and Reports on Form
8-K
(a) Exhibits None
(b) Reports on Form 8-K None
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIMED PHARMACEUTICALS, INC.
Date: August 11, 1995 By: /s/ Stephen M. Simes
Stephen M. Simes
President and Chief Executive Officer
Date: August 11, 1995 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer