Unigene fourth quarter net income increases to $4.4 million

Mar 9 2012

Unigene Laboratories, Inc. (OTCBB: UGNE), today announced financial results for the fourth quarter and full-year ended December 31, 2011.  The Company highlighted key corporate accomplishments in 2011 and outlined its anticipated milestones for 2012.

Fourth Quarter and Full-Year 2011 Financial Summary

Unigene announced positive net income of $4.4 million or $0.05 per share for the three months ended December 31, 2011 compared to a net loss of $3.9 million or ($0.04) per share for the same period in 2010.  This favorable change was mainly due to the termination of the Company’s oral PTH analog license agreement with GSK, whereby previously deferred milestone payments (in the aggregate amount of $7.7 million) were recognized as revenue.  The Company reported a net loss of $17.9 million for the full-year ended December 31, 2011 or ($0.19) per share compared to a net loss of $27.9 million or ($0.30) per share for 2010.

Revenue for the three months ended December 31, 2011 was $12.5 million, compared to $2.9 million for the three months ended December 31, 2010.  Revenue for the full-year ended December 31, 2011 was $20.5 million compared to $11.3 million for 2010.

Cash and cash equivalents at December 31, 2011 totaled $4.7 million compared to $12.2 million at the same time point in 2010.  Cash and cash equivalents at September 30, 2011 totaled $5.2 million.  Based on the Company’s current projections, cash flow is expected to be sufficient to fund its business operations through the end of 2012.

Ashleigh Palmer, Unigene’s President and CEO stated, “We accomplished a great deal in 2011, including the validation of our proprietary leading oral peptide drug delivery platform by way of the positive Phase 3 oral calcitonin results seen in Tarsa’s ORACAL trial and the positive Phase 2 trial results demonstrating definitive proof-of-concept for our oral PTH analog.  On the other hand, we did not see favorable results from Novartis’ Phase 3 program in which our manufacturing technology was used to produce calcitonin drug substance for a competitor’s formulation.  Also, most disappointingly, we did not benefit from milestone payments associated with GSK advancing to the next stage of clinical development for our oral PTH analog, the full rights to which now revert back to Unigene.  Nevertheless, I am extremely pleased with our many operational and scientific successes throughout last year, leading to cash runway extension and our avoidance of having to take on additional debt, as well as our ability to reduce the impact of negative events outside of our control.   Such events would almost certainly have been fatal 18 months ago.”  Palmer continued, “Although Unigene’s balance sheet represents an enormous priority challenge that threatens the Company’s viability going forward, my management team and I believe that, if we execute solidly on our stated corporate goals and milestones in 2012, we will have many of the key elements in place to begin effectively addressing the significant debt we have inherited.”

2011 Highlights

• Reported positive Phase 3 ORACAL trial results for Unigene’s oral calcitonin product, licensed to Tarsa Therapeutics, uniquely validating Unigene’s oral peptide drug delivery technology;
• Announced positive top-line Phase 2 proof-of-concept results for Unigene’s experimental oral parathyroid hormone (PTH) analog, further validating the Company’s oral delivery technology;
• Built a robust portfolio of seven feasibility studies evaluating Unigene’s industry-leading Peptelligence™ platform for oral drug delivery of proprietary peptides across a broad spectrum of high potential valuation therapeutic areas;
• Signed Manufacturing and Clinical Supply Agreement enabling Cara Therapeutics to commence Phase 1 clinical testing of a proprietary Unigene oral formulation of Cara’s investigational peptide drug, CR845, for neuropathic pain;
• Divested or monetized a number of non-strategic assets and interests to extend cash runway, including Unigene’s equity position in a Chinese manufacturing operation to a joint venture partner;
• Accelerated preclinical development of Unigene’s lead metabolic peptide, UGP281, targeting patients with morbid obesity; and
• Formed joint development vehicle (JDV) with Nordic Bioscience to advance up to three of Unigene’s proprietary peptide analogs through Phase 2 proof-of-concept for multiple blockbuster indications, including Type 2 diabetes and osteoarthritis.

2012 Anticipated Milestones

• Publish detailed results of oral PTH analog’s positive Phase 2 proof-of-concept trial in peer review journal and/or prestigious scientific congress;
• Effectively partner oral PTH analog, a highly transactable Phase 2 proof-of-concept asset;
• Continue to build a robust portfolio of feasibility programs with various biopharmaceutical partners evaluating Unigene’s industry-leading Peptelligence™ platform for oral drug delivery of proprietary peptides;
• Convert at least one Peptelligence™ feasibility study into a definitive license agreement associated with significant milestones and royalties;
• File an IND and begin Phase 1 clinical testing of Unigene’s lead metabolic peptide, UGP281, targeting patients with morbid obesity; and
• Select lead molecule and announce relevant preclinical study results for Type 2 diabetes or osteoarthritis indication under JDV with Nordic Bioscience.

Additional Financial Results & Notes

Revenue for the year ended December 31, 2011 increased $9.2 million, or 81%, to $20.5 million from $11.3 million in 2010.  This favorable change was primarily due to an increase in licensing revenue of $9.0 million mainly resulting from the termination of the Company’s license agreement with GSK, whereby previously deferred upfront and milestone payments in the aggregate amount of $7.7 million were recognized as revenue.  In addition, in 2011, development fees increased $3.0 million, or 164%, to $4.8 million from $1.8 million in 2010.  This increase was primarily due to development and testing services for GSK and Tarsa.  However, total revenue was negatively impacted by the continuing decline in Fortical revenue.

Unigene had operating income of $6.4 million for the three months ended December 31, 2011, an improvement of $9.1 million from the operating loss of $2.7 million for the three months ended December 31, 2010.  Operating loss for the twelve months ended December 31, 2011 decreased approximately $6.8 million, or 66%, to $3.5 million from $10.3 million for the corresponding period in 2010.

Net loss for 2011 decreased approximately $10.0 million, or 36%, to $17.9 million from $27.9 million in 2010.  This was primarily due to an increase in revenue of $9.2 million mainly due to an increase in licensing revenue of $9.0 million.  In addition, in 2011, interest expense increased $1.6 million and losses from our investments in Tarsa and Unigene’s former China joint venture increased by $4.3 million over 2010.  However, in 2010 the Company recognized a loss on the change in fair value of embedded conversion feature of $8.1 million and a debt issuance cost of $2.0 million.