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 September 30, 1995 Commission file number 0-3390
UNIMED PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1685346
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2150 E. Lake Cook Rd., 60089
Buffalo 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 6,244,011
($.25 par value)
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Page
Number
PART I. Financial Information
Financial Statements
ITEM 1.
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis 8
ITEM 2. of Results of Operations and Financial
Condition
PART II. Other Information 12
SIGNATURE PAGE 13
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
1995 1994
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 7,367,064 $ 6,101,093
Short-term investments 502,066 511,363
Receivables:
Trade 1,203,544 1,086,298
Other 535,884 61,947
Total receivables 1,739,428 1,148,245
Inventories 4,074,186 2,433,561
Prepaid expenses and other 162,597 338,412
Total current assets 13,845,341 10,532,674
Leasehold improvements and equipment 2,004,297 2,032,546
Less accumulated depreciation and
amortization 1,068,379 934,916
Net 935,918 1,097,630
Other 1,049,398 174,477
Total assets $ 15,830,657 $ 11,804,781
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, December 31,
1995 1994
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 129,661 $ 90,107
Accrued liabilities 350,698 352,234
Income taxes payable - - - 9,963
Due to Roxane 4,043,154 1,881,916
Research and development advances 1,000,000 - - -
Total current liabilities 5,523,513 2,334,220
Stockholders' equity:
Common stock, $.25 par value;
authorized 12,000,000 shares;
issued and outstanding: 6,244,011
and 6,127,161 1,561,003 1,531,790
Additional paid-in capital 17,468,494 17,052,661
Accumulated deficit (8,762,891) (9,152,931)
Accumulated foreign currency translation
adjustment 40,538 39,041
Total stockholders' equity 10,307,144 9,470,561
Total liabilities and stockholders'
equity $ 15,830,657 $ 11,804,781
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Net sales $2,386,350 $2,104,063 $6,348,617 $5,812,099
Cost of sales 1,352,403 905,142 3,417,102 2,582,817
Gross profit 1,033,947 1,198,921 2,931,515 3,229,282
Operating and administrative
expenses 525,285 430,578 1,620,971 1,672,041
Sales and marketing expenses 253,669 454,194 796,581 1,777,754
Research and development
expenses, net 209,426 89,533 452,804 246,678
Income (loss) from operations 45,567 224,616 61,159 (467,191)
Interest income 100,647 68,123 320,581 172,208
Income (loss) before income
taxes 146,214 292,739 381,740 (294,983)
Income tax benefit - - - - - - 8,300 - - -
Net income (loss) $ 146,214 $ 292,739 $ 390,040 $(294,983)
Net income (loss) per share $ .02 $ .05 $ .06 $ (.05)
Weighted average number of
common and common equivalent
shares outstanding 7,170,048 6,127,161 7,004,913 6,127,161
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Nine Months Ended
September 30
1995 1994
Cash flows provided by operations:
Net income (loss) $ 390,040 $ (294,983)
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Depreciation and amortization 133,463 144,302
Other (334) - - -
(Increase) decrease in current
receivables (89,351) 54,668
Decrease in notes receivable - - - 35,032
Increase in inventories (1,640,625) (266,873)
Decrease in prepaid expenses and other 175,815 53,898
Increase in payables and accrued
liabilities 28,054 206,822
Increase in due to Roxane 2,161,238 420,979
Net cash provided by operating
activities 1,158,300 353,845
Cash flows (used in) investing
activities:
Sale (purchase) of equipment 28,249 (121,558)
Net sale of short-term investments 9,297 - - -
Investment in Romark Laboratories, L.C. (500,000) - - -
Investment in Medisperse 50,000 (82,985)
Net cash (used in) investing
activities (412,454) (204,543)
Cash flows (used in) financing
activities:
Proceeds from issuance of stock 152,377 - - -
Issuance of note receivable (132,252) - - -
Research and development advances - net 500,000 - - -
Net cash provided by financing
activities 520,125 - - -
Increase in cash and cash equivalents 1,265,971 149,302
Cash and cash equivalents at beginning of
period 6,101,093 5,328,145
Cash and cash equivalents at end of
period $ 7,367,064 $ 5,477,447
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
September 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 September 30, 1995, the results of
operations for the three and nine months ended September 30, 1995 and 1994
and changes in cash flows for the nine month periods ended September 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
Nine Months Ended September 30, 1995 vs. Nine Months Ended
September 30, 1994
Net sales of the Company for the nine months ended September 30,
1995 of $6,348,617 were $536,518 or 9% higher than net sales of
$5,812,099 for the nine months ended September 30, 1994. The
Company's net income was $390,040 or six cents per share for the
nine months ended September 30, 1995, compared with a net loss
for the nine months ended September 30, 1994 of $294,983 or five
cents per share.
Marinol[R] (dronabinol) sales increased $732,081 or 16% to
$5,359,500, due to increased demand in the U.S. HIV market,
expansion into non-U.S. markets and a price increase.
Serc[R] (betahistine HCl) sales decreased $11,271 or 1% to
$771,270 for the nine months ended September 30, 1995 due to a
decrease in sales volume from foreign contracts.
Interest income increased to $320,581 in the nine month period
ended September 30, 1995, $148,373 higher than in the nine month
period ended September 30, 1994 primarily due to higher interest
rates and higher invested cash balances.
Cost of sales increased by $834,285 for the nine month period
ended September 30, 1995 compared to the nine month period ended
September 30, 1994, or an increase of 32%. Cost of sales
expressed as a percent of sale increased 21% over the same period
in 1994. The increase in cost of sales is principally due to
higher volume and to an increase to the allowance for Marinol[R]
Medicaid rebates paid by the Company's distributor, Roxane
Laboratories, Inc.
Operating and administrative expenses decreased in the nine month
period ended September 30, 1995 by $51,070 or 3%. As a
percentage of net sales, operating and administrative expenses
decreased 11%. This decrease was a result of discontinuing
active marketing of the Company's OTC product line.
Sales and marketing expenses decreased $981,173 or 55% in the
nine month period ended September 30, 1995. As a percentage of
net sales, sales and marketing expense decreased 59%. The nine
month period ended September 30, 1994 included significant
advertising and promotional expenditures associated with the OTC
product line. Early in 1995, the Company elected to de-emphasize
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 the
promotion of Marinol[R] through its dedicated HIV/AIDS specialty
sales force.
Net research and development expenses in the nine month period
ended September 30, 1995 were $452,804 as compared to $246,678 in
the nine month period ended September 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 7% as compared to 4% in the nine month
period ended September 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
which treats a broad spectrum of parasitic infections,
Nitazoxanide (NTZ), and two new products for the treatment of
testosterone deficiency in men.
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 September 30, 1995 vs. Three Months Ended
September 30, 1994
Net sales of the Company for the three months ended September 30,
1995 of $2,386,350 were $282,287 or 13% higher than net sales of
$2,104,063 for the three months ended September 30, 1994. The
Company's net income was $146,214 or two cents per share for the
three months ended September 30, 1995. Net income for the three
months ended September 30, 1994 was $292,739 or five cents per
share. The results of operations for each of the three month
periods ended September 30 do not include a provision for income
taxes as the Company has utilized existing net operating loss
carryforwards.
Marinol[R] (dronabinol) sales increased $378,727 or 22% to
$2,065,440, due to increased demand in the U.S. HIV market,
expansion into non-U.S markets and a price increase.
Serc[R] (betahistine HCl) sales decreased $23,711 or 8% to
$271,713 for the three months ended September 30, 1995 due to
decreased sales volume from foreign contracts.
Interest income increased to $100,647 in the three month period
ended September 30, 1995, $32,524 higher than in the three month
period ended September 30, 1994 primarily due to higher interest
rates and higher invested cash balances.
Cost of sales increased by $447,261 for the three month period
ended September 30, 1995 compared to the three month period ended
September 30, 1994, or an increase of 49%. The increase in cost
of sales is principally due to higher volume and to an increase
to the allowance for Marinol[R] Medicaid rebates paid by the
Company's distributor, Roxane Laboratories, Inc.
Operating and administrative expenses increased in the three
month period ended September 30, 1995 by $94,707 or 22%. As a
percentage of net sales, operating and administrative expenses
increased 8%. This increase was a result of increased expenses
related to the implementation of the Company's in-licensing
program.
Sales and marketing expenses decreased $200,525 or 44% in the
three month period ended September 30, 1995. As a percentage of
net sales, sales and marketing expense decreased 51%. The three
month period ended September 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 the promotion of Marinol[R] through its dedicated HIV/AIDS
specialty sales force.
Net research and development expenses in the three month period
ended September 30, 1995 were $209,426 as compared to $89,533 in
the three month period ended September 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 September 30, 1995, the Company had cash, cash equivalents and
short-term investments of $7,869,130, compared to $6,612,456 at
December 31, 1994, an increase of $1,256,674.
The Company generated net cash from operations totaling
$1,158,300 for the nine month period ended September 30, 1995.
Inventories increased by $1,640,625 or 67% for the nine month
period ended September 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 25% 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 nine month period
ended September 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 inventory
levels.
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.
The Company continued to implement its new in-licensing program
when it announced in August 1995, that it licensed two new
products for treatment of testosterone deficiency in men. As
part of the agreement, the Company has received $500,000 and will
receive an additional $500,000 in January 1996 in research and
development payments from Besins Iscovesco of Paris, France, a
company that specializes in gel formulations for topical
administration of systemic drugs. These research and development
advances will offset expenses related to the drug development
program.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior
Securities None
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: November 2, 1995 By: /s/ Stephen M. Simes
Stephen M. Simes
President and Chief Executive Officer
Date: November 2, 1995 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer