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 March 31, 1995 Commission file number 0-3390
UNIMED PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1685346
(State or other (I.R.S. Employer
jurisdiction of incorporation or Identification Number)
organization)
2150 E. Lake Cook Rd.,
Buffalo Grove, Illinois 60089
(Address of principal executive (Zip Code)
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 6,127,161
($.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
(Unaudited)
March 31, December 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 6,290,696 $ 6,101,093
Short-term investments 508,264 511,363
Receivables:
Trade 964,392 1,086,298
Other 80,543 61,947
Total receivables 1,044,935 1,148,245
Inventories 4,937,550 2,433,561
Prepaid expenses 292,873 338,412
Total current assets 13,074,318 10,532,674
Leasehold improvements and equipment 2,021,937 2,032,546
Less accumulated depreciation and 979,971 934,916
amortization
Net 1,041,966 1,097,630
Other 306,729 174,477
Total assets $ 14,423,013 $ 11,804,781
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,594 $ 90,107
Accrued liabilities 325,938 352,234
Income taxes payable - - - 9,963
Due to Roxane 4,443,653 1,881,916
Total current liabilities 4,840,185 2,334,220
Stockholders' equity:
Common stock, $.25 par value; authorized
12,000,000 shares;
issued and outstanding: 6,127,161 1,531,790 1,531,790
Additional paid-in capital 17,052,661 17,052,661
Accumulated deficit (9,042,690) (9,152,931)
Accumulated foreign currency translation 41,067 39,041
adjustment
Total stockholders' equity 9,582,828 9,470,561
Total liabilities and stockholders' $ 14,423,013 $ 11,804,781
equity
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1995 and 1994
(Unaudited)
March 31, March 31,
1995 1994
Net sales $ 1,987,747 $ 1,736,829
Cost of sales 1,024,022 799,213
Gross profit 963,725 937,616
Operating and administrative expenses 579,551 642,695
Sales and marketing expenses 270,463 665,917
Research and development expenses, net 113,988 74,124
(Loss) from operations (277) (445,120)
Interest income 102,218 56,363
Income (loss) before income taxes 101,941 (388,757)
Income tax benefit 8,300 - - -
Net income (loss) $ 110,241 $ (388,757)
Net income (loss) per share $ .02 $ (.06)
Weighted average number of common and
common equivalent shares outstanding 6,509,002 6,127,161
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994
(Unaudited)
March 31, March 31,
1995 1994
Cash flows provided by operations:
Net income (loss) $ 110,241 $ (388,757)
Adjustments to reconcile net income
(loss) to net cash
provided by operations:
Depreciation and amortization 45,055 47,764
Other 2,026 - - -
Decrease in current receivables 103,310 218,332
Decrease in notes receivable - - - 35,032
(Increase) in inventories (2,503,989) (1,072,754)
Decrease in prepaid expenses 45,539 12,232
(Decrease) increase in payables and
accrued liabilities (55,772) 26,333
Increase in due to Roxane 2,561,737 1,167,152
Net cash provided by operating
activities 308,147 45,334
Cash flows provided by (used in)
investing activities:
Sale (purchase) of equipment 10,609 (72,773)
Net sale of short-term investments 3,099 - - -
Investment in Medisperse - - - (102,776)
Net cash provided by (used in)
investing activities 13,708 (175,549)
Cash flows (used in) financing
activities:
Issuance of note receivable (132,252) - - -
Net cash (used in) financing
activities (132,252) - - -
Increase (decrease) in cash and cash
equivalents 189,603 (130,215)
Cash and cash equivalents at beginning
of period 6,101,093 5,328,145
Cash and cash equivalents at end of
period $ 6,290,696 $ 5,197,930
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
March 31, 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 March 31, 1995 and the results of
operations and changes in cash flows for the three-month period then ended.
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
Three Months Ended March 31, 1995 vs. Three Months Ended March 31, 1994
Net sales of the Company for the three months ended March 31, 1995 (the
"Fiscal 1995 Period") of $1,987,747 were $250,918 or 14% higher than net
sales of $1,736,829 for the three months ended March 31, 1994 (the "Fiscal
1994 Period"). The Company's net income was $110,241 or two cents per
share for the Fiscal 1995 Period. Net loss for the Fiscal 1994 Period was
$388,757 or six cents per share.
Marinol[R] (dronabinol) sales increased 20% to $1,652,592, due to increased
demand in the HIV market.
Serc[R] (betahistine HCl) sales increased $21,993 or 11% to $228,760 for
the three months ended March 31, 1995 due to increased sales volume under
foreign contracts.
Over-the-counter (OTC) products, which include Ondrox[TM], a sustained
release nutritional supplement, and the MucoCare[TM] line of products which
include MouthKote[TM] and the related line extensions, contributed
$106,395 to net sales in the Fiscal 1995 Period. Net sales from these
products in the Fiscal 1994 Period were $157,182. Net sales decreased
$50,787 or 32% due to termination of advertising and promotional programs
relating to the OTC products.
Interest income increased to $102,218 in the Fiscal 1995 Period, $45,855
higher than in the Fiscal 1994 Period primarily due to higher interest
rates and higher invested cash balances.
Cost of sales increased by $224,809 for the three month period ended March
31, 1995 compared to the three month period ended March 31, 1994, or an
increase of 28%. Cost of sales expressed as a percent of sale increased
12% over the same period in 1994. The increase in cost of sales is
principally due to higher volume and to Marinol[R] royalty payment
adjustments associated with state Medicaid rebates paid by the Company's
distributor, Roxane Laboratories, Inc.
Operating and administrative expenses decreased in the Fiscal 1995 Period
by $63,144 or 10%. As a percentage of net sales, operating and
administrative expenses decreased 21%. This decrease was a result of
downsizing the Company's sales and administration staff in connection with
discontinuing active marketing of the OTC products. The Company expects to
continue to distribute the OTC product line as long as inventory remains.
Sales and marketing expenses decreased $395,454 or 59% in the Fiscal 1995
Period. As a percentage of net sales, sales and marketing expense
decreased 64%. The Fiscal 1994 Period 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 specialty sales force.
Net research and development expenses in the Fiscal 1995 Period were
$113,988 as compared to $74,124 in the Fiscal 1994 Period primarily due to
increased spending on Phase IV Marinol[R] clinical trials. Marinol[R]
clinical trial expenses are shared by the Company's distributor. In
addition, the Company added a new clinical management staff including a
vice president of clinical and regulatory affairs in December 1994 to
support the current and new clinical development programs. As a percentage
of net sales, research and development costs were 6% as compared to 4% in
the three month period ended March 31, 1994. The Company expects research
and development expenses to increase following the successful completion of
its in-licensing program.
The Company recently 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.
Liquidity
At March 31, 1995, the Company had cash, cash equivalents and short-term
investments of $6,798,960, compared to $6,612,456 at December 31, 1994, an
increase of $186,504. On a year-to-year basis, comparing March 31, 1995
with the same period in 1994, cash and cash equivalents increased by
$1,092,766.
The Company generated net cash from operations totaling $308,147 for the
quarter ended March 31, 1995. Marinol[R] inventories increased by
approximately $2,503,989 or 103% for the quarter ended March 31, 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 30% 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 quarter, the distributor
advanced the Company approximately $2,600,000. 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.
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 None
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: May 12, 1995 By: ________/s/ Stephen M. Simes_______
Stephen M. Simes
President and Chief Executive Officer
Date: May 12, 1995 By: _________/s/ David E. Riggs_________
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer