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, 1997 Commission file number 0-3390
UNIMED PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1685346
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2150 E. Lake Cook Rd., Buffalo 60089
Grove, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number
including area code (847) 541-2525
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 8,783,299
($.25 par value)
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Page
Number
PART I. Financial Information
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of
Operations 5
Condensed Consolidated Statements of Cash
Flows 6
Notes to Condensed Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8
PART II. Other Information 10
SIGNATURE PAGE 11
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March 31, December 31,
1997 1996
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 3,761,503 $ 4,458,889
Short-term investments 13,957,853 16,370,897
Receivables:
Trade 1,379,697 1,876,807
Other 316,994 78,109
Total receivables 1,696,691 1,954,916
Inventories 3,774,794 4,184,855
Prepaid expenses 260,030 108,457
Total current assets 23,450,871 27,078,014
Equipment and leasehold
improvements, at cost 2,125,651 2,035,807
Less accumulated depreciation and
amortization 1,275,410 1,227,790
Net 850,241 808,017
Investment in and subordinated
debenture from Romark
Laboratories, L.C. 2,275,910 2,275,910
Product rights, net of amortization 5,262,363 584,934
Total assets $31,839,385 $30,746,875
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
March 31, December 31,
1997 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 361,775 $ 376,761
Accrued and other liabilities 1,300,732 1,210,664
Due to Roxane Laboratories, Inc. 4,431,941 4,945,801
Deferred research and development revenues 1,209,601 1,643,887
Current portion of long-term obligation 484,000 - - -
Total current liabilities 7,788,049 8,177,113
Long-term obligation 1,213,000 - - -
Total liabilities 9,001,049 8,177,113
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 shares; issued and
outstanding: 8,783,299 and 8,775,499 2,195,825 2,193,875
Additional paid-in capital 27,359,340 27,340,665
Accumulated deficit (6,757,985) (7,005,726)
Accumulated foreign currency translation
adjustment 41,156 40,948
Total stockholders' equity 22,838,336 22,569,762
Total liabilities and stockholders'
equity $31,839,385 $30,746,875
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996
(Unaudited)
March 31, March 31,
1997 1996
Net sales $1,970,883 $1,556,247
Research and development revenue 442,727 172,180
Total revenue 2,413,610 1,728,427
Cost of sales 593,400 678,551
Gross profit 1,820,210 1,049,876
Operating and administrative expenses 781,464 559,336
Sales and marketing expenses 485,450 218,779
Research and development expenses 719,130 431,071
Total expenses 1,986,044 1,209,186
Loss from operations (165,834) (159,310)
Other income (expense):
Gain on sale of trademark - - - 200,000
Product right sublicense gain 150,000 - - -
Interest income 274,908 193,837
Other expense (11,333) (21,019)
Income before income taxes 247,741 213,508
Income tax benefit - - - 5,931
Net income $ 247,741 $ 219,439
Net income per share:
Basic $ .03 $ .03
Fully diluted $ .03 $ .03
Weighted average number of common and
common equivalent shares outstanding:
Basic 8,780,790 7,295,304
Fully diluted 9,008,495 8,236,090
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(Unaudited)
March 31, March 31,
1997 1996
Cash flows provided by operations:
Net income $ 247,741 $ 219,439
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 69,688 45,000
Write-off of Investment in Medisperse - - - 21,019
Other 210 134
Decrease in current receivables 258,224 1,099,440
Decrease in inventories 410,061 579,736
(Increase) Decrease in prepaid
expenses (151,573) 1,742
Increase (Decrease) in payables,
accrued and other liabilities 75,082 (289,984)
Decrease in due to Roxane
Laboratories, Inc. (513,859) (526,309)
Net cash provided by operating
activities 395,574 1,150,217
Cash flows (used in) provided by
investing activities:
Capital expenditures (92,342) (11,483)
Sale of short-term investments 2,413,044 1,388,756
Product acquisition (3,000,000) - - -
Net cash (used in) provided by
investing activities (679,298) 1,377,273
Cash flows (used in) provided by
financing activities:
Proceeds from issuance of common
stock 20,625 9,630,578
Deferred research and development
revenues-net (434,287) 1,036,035
Net cash (used in) provided by
financing activities (413,662) 10,666,613
(Decrease) Increase in cash and cash
equivalents (697,386) 13,194,103
Cash and cash equivalents at beginning
of period 4,458,889 7,011,843
Cash and cash equivalents at end of
period $ 3,761,503 $20,205,946
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ - - - $ 5,769
Obligation assumed due to product
acquisition $1,697,000 $ - - -
See accompanying notes to consolidated financial statements.
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
March 31, 1997
(Unaudited)
NOTE 1
The condensed consolidated financial information herein is
unaudited, other than the Condensed Consolidated Balance Sheet at
December 31, 1996, which is derived from the audited financial
statements. The unaudited interim financial statements include the
accounts of UNIMED Pharmaceuticals, Inc. (the Company ), and its
wholly-owned subsidiary, Unimed Canada, 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,
1997, the results of operations for the three months ended March 31,
1997 and 1996 and changes in cash flows for the three month periods
ended March 31, 1997 and 1996.
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 1996 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, 1997 vs. Three Months Ended March 31,
1996
Total revenue for the three months ended March 31, 1997 (the Fiscal
1997 Period ) increased 40 percent over total revenue for the three
months ended March 31, 1996 (the Fiscal 1996 Period ). Total
revenue consists of net sales and research and development revenue.
Net income was $247,741 or three cents per share for the Fiscal 1997
Period. Net income for the Fiscal 1996 Period was $219,439 or three
cents per share.
Net sales for the Fiscal 1997 Period increased by 27 percent or
$414,636 to $1,970,883 compared to net sales of $1,556,247 for the
Fiscal 1996 Period. The increase in net sales was attributable to a
combination of a 17% sales increase in Marinol[R] (dronabinol) due
to higher unit volume and the introduction in March of Maxaquin[R]
(lomefloxacin), a once-a-day fluoroquinolone antibiotic for urinary
tract infections, which generated net sales of $157,180 in March.
Total revenue, in addition to net sales, included $442,727 in
research and development revenue in the Fiscal 1997 Period from
foreign licensors' partial support of clinical development programs
on in-licensed products. In 1997, approximately $1.6 million of
future research and development expenditures will be offset by
deferred research and development revenues paid to the Company by
foreign licensors.
Cost of sales decreased by $85,151 or 13 percent for the three month
period ended March 31, 1997 compared to the three month period ended
March 31, 1996. This decrease is due to lower Marinol inventory
costs. Cost of sales expressed as a percent of net sales decreased
from 44% for the Fiscal 1996 Period to 30% for the same period in
1997.
Operating and administrative expenses increased in the Fiscal 1997
Period by $222,128 or 40 percent. This increase was due in part to
higher personnel related expenses and accrued legal expenses related
to product licenses. Operating and administrative expenses as a
percentage of net sales were 40% in the Fiscal 1997 Period compared
to 36% in the Fiscal 1996 Period.
Sales and marketing expenses increased $266,671 to $485,450 in the
Fiscal 1997 Period as the Company began Maxaquin related promotional
programs as well as adding a new executive responsible for
commercial development of Maxaquin. Sales and marketing expenses
were 25% of net sales in the Fiscal 1997 Period compared to 14% in
the Fiscal 1996 Period.
Research and development expenses in the Fiscal 1997 Period were
$719,130, compared to $431,071 in the Fiscal 1996 Period. Research
and development expenses were 36% of net sales for the Fiscal 1997
Period, and 28 percent of net sales for the Fiscal 1996 Period.
This increase is due to clinical development which included the
addition of clinical and regulatory staff to manage clinical
development programs. Research and development expenses of $442,727
were offset by research and development revenue in the Fiscal 1997
Period.
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 March 31, 1997, the Company had cash, cash equivalents and short-
term investments of $17,719,356, compared to $20,829,786 at December
31, 1996, a decrease of $3,110,430. The Company generated $2,413,044
from maturing short-investments during the Fiscal 1997 Period.
The Company generated net cash from operations totaling $395,574 for
the quarter ended March 31, 1997. Current receivables decreased by
$258,224 due to receipt of royalty payments from the Company's
distributor of Marinol[R]. Inventories decreased $410,061 due to
ongoing sales of Marinol[R] and the timing of new inventory
deliveries.
On February 28, 1997, the Company acquired from G.D. Searle & Co.
(Searle), a wholly-owned subsidiary of the Monsanto Company, the
U.S. marketing and distribution right to Maxaquin (lomefloxacin), a
fluoroquinolone anti-infective drug. In addition, Unimed will make
sales-based distribution fee payments to Searle during the term of
the agreement. The Company also recorded long and short-term
obligations along with imputed interest on that obligation, to be
satisfied January 2, 1998 and 1999, respectively.
Forward-Looking Statements
When used in this discussion, the words believes and expects and
similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and
uncertainties, over which the Company has no control, which could
cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-
looking statements which speak only as of the date hereof. The
Company undertakes no obligations to republish revised forward-
looking statements to reflect events or circumstances after the date
thereof or to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various
disclosures made by the Company, in this report, as well as the
Company's periodic reports filed with the Securities and Exchange
Commission.
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
On January 13, 1997, the Company filed
a Current Report on Form 8-K to
announce the resignation of Stephen
Simes as President/CEO and a Director
of the Company to pursue other business
interests. Dr. Robert Dudley, formerly
Vice President of Clinical and
Regulatory Affairs, was appointed CEO.
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 13, 1997 By: /s/ Robert E. Dudley
Robert E. Dudley
Chief Executive Officer
Date: May 13, 1997 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer