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, 1996 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 (847) 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 8,715,532
($.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 5
Operations
Consolidated Statements of Cash 6
Flows
Notes to Consolidated Financial 7
Statements
ITEM 2. Management's Discussion and 8
Analysis 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
June 30, December 31,
1996 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,263,705 $ 7,011,843
Short-term investments 16,210,018 1,388,756
Receivables:
Trade 694,811 1,548,148
Other 40,968 535,104
Total receivables 735,779 2,083,252
Inventories 4,967,178 3,327,939
Prepaid expenses 270,167 276,043
Total current assets 27,446,847 14,087,833
Leasehold improvements and equipment 1,949,090 1,922,006
Less accumulated depreciation and 1,137,890 1,050,866
amortization
Net 811,200 871,140
Investment, at cost 600,000 600,000
Other assets 592,936 746,208
Total assets $29,450,983 $16,305,181
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
1996 1995
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 185,277 $ 416,705
Accrued liabilities 722,756 511,446
Income taxes payable 18,300 20,000
Due to Roxane 5,157,904 3,716,633
Deferred research and development revenues 1,963,512 1,000,000
Total current liabilities 8,047,749 5,664,784
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 and 12,000,000 shares; issued
and outstanding: 8,715,532
and 6,270,886 2,178,883 1,567,722
Additional paid-in capital 27,139,814 17,559,861
Accumulated deficit (7,956,393) (8,527,869)
Accumulated foreign currency translation
adjustment 40,930 40,683
Total stockholders' equity 21,403,234 10,640,397
Total liabilities and stockholders' $29,450,983 $16,305,181
equity
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996 and 1995
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Net sales $1,692,575 $1,639,228 $3,248,822 $3,311,610
Research and development revenue 72,523 - - - 244,703 - - -
Total revenue 1,765,098 1,639,228 3,493,525 3,311,610
Cost of sales 820,146 705,385 1,498,697 1,414,042
Gross profit 944,952 933,843 1,994,828 1,897,568
Operating and administrative
expenses 512,972 516,135 1,072,308 1,095,686
Sales and marketing expenses 302,017 272,449 520,796 542,912
Research and development
expenses 344,838 129,390 775,909 243,378
Total expenses 1,159,827 917,974 2,369,013 1,881,976
(Loss) income from operations (214,875) 15,869 (374,185) 15,592
Other income (expense):
Interest income 265,837 117,716 459,674 219,934
Product right sublicense gain 311,075 - - - 311,075 - - -
Gain on sale of trademark - - - - - - 200,000 - - -
Other expense - - - - - - (21,019) - - -
Income before income taxes 362,037 133,585 575,545 235,526
Income tax expense (benefit) 10,000 - - - 4,069 (8,300)
Net income $ 352,037 $ 133,585 $ 571,476 $ 243,826
Net income per share:
Primary $ .04 $ .02 $ .07 $ .04
Fully diluted $ .04 $ .02 $ .07 $ .04
Weighted average number of common and
common equivalent shares outstanding:
Primary 9,268,939 6,836,961 8,557,441 6,734,804
Fully diluted 9,300,710 6,932,420 8,790,838 6,932,420
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(Unaudited)
Six Months Ended
June 30
1996 1995
Cash flows provided by operations:
Net income $ 571,476 $ 243,826
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 90,249 92,836
Write-off of Investment in Medisperse 21,019 - - -
Other 1,949 1,712
Decrease in current receivables 1,345,772 133,038
Increase in inventories (1,639,239) (2,209,357)
Decrease in prepaid expenses 5,876 71,562
(Decrease) increase in payables and
accrued liabilities (21,818) 12,442
Increase in due to Roxane 1,441,270 2,518,918
Net cash provided by operating
activities 1,816,554 864,977
Cash flows used in investing activities:
(Purchase) sale of equipment, net (30,308) 10,609
(Purchase) sale of short-term
investments, net (14,821,262) 6,198
Investment in Romark Laboratories,L.C. - - - (500,000)
Net cash used in investing activities (14,851,570) (483,193)
Cash flows provided by (used in) financing
activities:
Proceeds from payment of note
receivable 132,252 - - -
Proceeds from issuance of stock 10,191,114 6,187
Issuance of note receivable - - - (132,252)
Deferred research and development
revenue, net 963,512 - - -
Net cash provided by (used in)
financing activities 11,286,878 (126,065)
(Decrease) increase in cash and cash
equivalents (1,748,138) 255,719
Cash and cash equivalents at beginning of
period 7,011,843 6,101,093
Cash and cash equivalents at end of period $ 5,263,705 $ 6,356,812
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 5,769 $ 1,663
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996
(Unaudited)
NOTE 1
The consolidated financial information herein is unaudited, other than the
Consolidated Balance Sheet at December 31, 1995, 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, 1996, the results of
operations for the three and six months ended June 30, 1996 and 1995 and
changes in cash flows for the six-month period ended June 30, 1996 and
1995.
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 1995 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, 1996 vs. Six Months Ended June 30, 1995
Total revenue for the six months ended June 30, 1996 increased five percent
over total revenue for the six months ended June 30, 1995. Total revenue
consists of net sales and research and development revenue. Net income was
$571,476 or seven cents per share for the six months ended June 30, 1996.
Net income for the six months ended June 30, 1995 was $243,826 or four
cents per share.
Net sales for the six months ended June 30, 1996 declined by two percent or
$62,788 to $3,248,822 compared to net sales of $3,311,610 for the six
months ended June 30, 1995. The decline in net sales was attributable to
two changes in the Company's marketed product line: 1) the sale of the
Company's property rights in and regulatory approvals of Serc [R]
(betahistine HCl) to Solvay-Duphar as of December 31, 1995 and 2) the
termination of distribution of the Company's over-the-counter products as
of December 31, 1995. Accordingly, no sales of Serc or the over-the-
counter products were recorded during the six month period ended June 30,
1996, whereas, net sales from Serc were $499,557 for the six months ended
June 30, 1995 and net sales of over-the-counter products were $160,285 for
the six months ended June 30, 1995. The discontinuation of Serc and the
over-the-counter products was off-set by a 23% sales increase in Marinol
[R] (dronabinol). Marinol sales for the six month period ended June 30,
1996 increased $597,054 to $3,248,822 due to higher unit volume and a price
increase. Marinol is currently the sole source of product sales to the
Company.
Total revenue, in addition to net sales, included $244,703 in research and
development revenue in the six month period ended June 30, 1996 from
foreign licensors' partial support of clinical development programs.
Approximately $2 million of future research and development expenditures
are expected to be offset by deferred research and development revenues
paid to the Company by foreign licensors.
Interest income increased to $459,674 in the six month period ended June
30, 1996, $239,740 higher than in the six month period ended June 30, 1995
primarily due to higher invested cash balances.
Cost of sales increased by $84,655 or six percent for the six month period
ended June 30, 1996 compared to the six month period ended June 30, 1995.
This increase is due to the corresponding increase in Marinol sales and a
provision for obsolete inventory, offset by the discontinuation of Serc and
the Company's over-the-counter products. Cost of sales expressed as a
percent of net sales increased to 46% from 43% for the same period in 1995.
Operating and administrative expenses decreased for the six months ended
June 30, 1996 by $23,378 or two percent. Operating and administrative
expenses as a percentage of net sales were 33% in both six month periods
ended June 30, 1996 and 1995, respectively.
Sales and marketing expenses decreased $22,116 or 4% in the six month
period ended June 30, 1996. Sales and marketing expenses were 16% of net
sales for both six month periods ended June 30, 1996 and 1995,
respectively.
Research and development expenses during the six months ended June 30, 1996
were $775,909 compared to $243,378 in the same period in 1995. Research
and development expenses were 24% of net sales for the six months ended
June 30, 1996, and seven percent of net sales for the same period in 1995.
The increase is due to clinical development of NTZ, Androgel [TM] and
Androgel [TM]-DHT which included the addition of clinical and regulatory
staff to manage clinical development programs. Unimed has obtained an
exclusive license to develop and market oral dosage formulations of NTZ for
human use in the United States, Canada, Australia and New Zealand from
Romark Laboratories, L.C. of Tampa, Florida, and an exclusive license from
Besins Iscovesco of Paris, France covering the Androgel [TM] products. The
research and development expenses of $775,909 were offset by research and
development revenue of $244,703 in the six months ended June 30, 1996.
The Company expects research and development expenses to increase as
planned product development continues and to be partially offset by
research and development revenues.
Three Months Ended June 30, 1996 vs. Three Months Ended June 30, 1995
Total revenue for the three months ended June 30, 1996 increased eight
percent over total revenue for the three months ended June 30, 1995. Total
revenue consists of net sales and research and development revenue. Net
income was $352,037 or four cents per share for the three months ended June
30, 1996. Net income for the three months ended June 30, 1995 was $133,585
or two cents per share.
Net sales for the three months ended June 30, 1996 were $1,692,575,
representing an increase of three percent or $53,347 compared to net sales
of $1,639,228 for the three months ended June 30, 1995. The increase in
net sales was attributable to a 29% increase in Marinol sales. The
increase in net sales was offset by two changes in the Company's marketed
product line: 1) the sale of the Company's property rights in and
regulatory approvals of Serc to Solvay-Duphar as of December 31, 1995 and
2) the termination of distribution of the Company's over-the-counter
products as of December 31, 1995. Accordingly, no sales of Serc or over-
the-counter products were recorded during the three months ended June 30,
1996, whereas, net sales from Serc were $270,797 for the three months ended
June 30, 1995 and net sales of over-the-counter products were $53,890 for
the three months ended June 30, 1995. Marinol is currently the sole source
of product sales to the Company. Marinol sales increased due to higher
unit volume and a price increase.
Total revenue, in addition to net sales, included $72,523 in research and
development revenue in the three month period ended June 30, 1996 from
foreign licensors' partial support of clinical development programs.
Approximately $2 million of future research and development expenditures
are expected to be offset by deferred research and development revenues
paid to the Company by foreign licensors.
Interest income increased $148,121, or 126%, to $265,837 in the three month
period ended June 30, 1996 as compared to the same three month period in
1995. This increase was due primarily to higher invested cash balances.
Cost of sales increased by $114,761 or sixteen percent for the three month
period ended June 30, 1996 compared to the three month period ended June
30, 1995. This increase is due to the corresponding increase in Marinol
sales, offset by the discontinuation of Serc and the Company's over-the-
counter products. Cost of sales expressed as a percent of net sales
increased to 48% from 43% for the same period in 1995.
Operating and administrative expenses decreased during the three month
period ended June 30, 1996 by $3,163 or one percent. Operating and
administrative expenses as a percentage of net sales were 30% in the three
months ended June 30, 1996 compared to 31% for the same period in 1995.
Sales and marketing expenses increased $29,568 or 11% in the three month
period ended June 30, 1996. Sales and marketing expenses were 18% of net
sales in the three month period ended June 30, 1996 compared to 17% for the
same period in 1995.
Research and development expenses in the three month period ended June 30,
1996 were $344,838, compared to $129,390 in the same period ended in 1995.
Research and development expenses were 20% and 8% of net sales for the
three month periods ended June 30, 1996 and 1995, respectively. The
increase is due to clinical development of NTZ, Androgel [TM] and Androgel
[TM]-DHT which included the addition of clinical and regulatory staff to
manage clinical development programs. The research and development
expenses of $344,838 were offset by research and development revenue of
$72,523 for the three months ended June 30, 1996.
The Company expects research and development expenses to increase as
planned product development continues and to be partially offset by
research and development revenues.
Liquidity
At June 30, 1996, the Company had cash, cash equivalents and short-term
investments of $21,473,723 compared to $8,400,599 at December 31, 1995, an
increase of $13,073,124.
The Company generated net cash from operations totaling $1,816,554 for the
six months ended June 30, 1996. Current receivables decreased by
$1,345,772 due to receipt of cash due under a foreign license agreement and
a royalty from the Company's distributor of Marinol. Inventories increased
$1,639,239 primarily due to final delivery of 1995 Marinol raw material
production. Marinol inventories are normally 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 inventories. During the six month period ended June 30,
1996, the distributor advanced the Company approximately $1,400,000. The
current liability, Due to Roxane, is relieved on a quarterly basis from
royalties remitted to the Company. The reduction in the quarterly royalty
corresponds to the cost of Marinol inventory sold during the quarter.
The Company generated $10,191,000 from the issuance of common stock during
the six month period ended June 30, 1996. Net proceeds of approximately
$7,500,000 were received from a private placement of the Company's common
stock. Approximately $1,700,000 was received from exercised stock warrants
owned by the Company's Chairman. Approximately $500,000 was received in
the six month period ended June 30, 1996 in connection with stock option
exercises. Additionally, in May the Company signed a collaboration
agreement with BioChem Therapeutic Inc., the wholly-owned therapeutic
subsidiary of BioChem Pharma resulting in the purchase of 50,771 shares of
the Company's stock for proceeds of $489,000. The Company also received
$311,075 for the sublicense of product rights in Canada to NTZ, Androgel
[TM] and Androgel [TM]-DHT. Successful development of the Androgel [TM]
products may result in additional equity investment and milestone payments
from BioChem Therapeutic Inc.
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
On May 2, 1996, at the Annual Meeting of Stockholders, the stockholders
re-elected one Director. The stockholders also adopted an amendment to
increase the number of shares covered by the 1991 Stock Option Plan
from 1,000,000 to 1,800,000. In addition, the stockholders approved an
amendment to the Corporation's Certificate of Incorporation to increase
the Company's authorized Common Stock from 12,000,000 to 30,000,000
shares. The results of the shareholder vote are shown below.
Abstentions/ Broker
For Against Withheld Non-votes
Stephen M. Simes 6,702,960 0 234,398 0
1991 Stock Option Plan 4,094,182 500,409 31,267 2,311,500
Certificate of 6,473,577 430,253 33,528 0
Incorporation
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 13, 1996 By: /s/ Stephen M. Simes
Stephen M. Simes
President and Chief Executive Officer
Date: August 13, 1996 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer