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, 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 November 4, 1996:
Title of each class Number of shares outstanding
Common Stock 8,770,312
($.25 par value)
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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 12
SIGNATURE PAGE 13
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Unaudited)
September December
30, 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,531,234 $ 7,011,843
Short-term investments 16,271,815 1,388,756
Receivables:
Trade 1,755,561 1,548,148
Other 80,214 535,104
Total receivables 1,835,775 2,083,252
Inventories 4,681,424 3,327,939
Prepaid expenses 145,024 276,043
Total current assets 26,465,272 14,087,833
Leasehold improvements and
equipment 1,983,827 1,922,006
Less accumulated depreciation and
amortization 1,180,785 1,050,866
Net 803,042 871,140
Investment in and subordinated
debenture from Romark
Laboratories, L.C. 2,275,910 600,000
Other assets 584,934 746,208
Total assets $ 30,129,158 $ 16,305,181
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 310,067 $ 416,705
Accrued liabilities 945,926 511,446
Income taxes payable 18,300 20,000
Due to Roxane 5,221,754 3,716,633
Deferred research and development revenues 1,653,697 1,000,000
Total current liabilities 8,149,744 5,664,784
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 and 12,000,000 shares; issued
issued and outstanding: 8,761,312 and
6,270,886 2,190,329 1,567,722
Additional paid-in capital 27,312,755 17,559,861
Accumulated deficit (7,564,529) (8,527,869)
Accumulated foreign currency translation
adjustment 40,859 40,683
Total stockholders' equity 21,979,414 10,640,397
Total liabilities and stockholders'
equity $ 30,129,158 $ 16,305,181
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $2,088,692 $1,921,236 $5,337,514 $5,232,846
Research and development
revenue 309,815 82,352 554,518 82,352
Total revenue 2,398,507 2,003,588 5,892,032 5,315,198
Cost of sales 855,539 887,289 2,354,236 2,301,331
Gross profit 1,542,968 1,116,299 3,537,796 3,013,867
Operating and administrative
expenses 572,202 525,285 1,644,510 1,620,971
Sales and marketing expenses 379,075 253,669 899,871 796,581
Research and development
expenses 488,149 291,778 1,264,058 535,156
Total expenses 1,439,426 1,070,732 3,808,439 2,952,708
Income (loss) from operations 103,542 45,567 (270,643) 61,159
Other income (expense):
Interest income 296,324 100,647 755,998 320,581
Product right sublicense
gain - - - - - - 311,075 - - -
Gain on sale of trademark - - - - - - 200,000 - - -
Other expense (8,002) - - - (29,021) - - -
Income before income taxes 391,864 146,214 967,409 381,740
Income tax expense (benefit) - - - - - - 4,069 (8,300)
Net income $391,864 $146,214 $963,340 $390,040
Net income per share:
Primary $ .04 $ .02 $ .11 $ .06
Fully diluted $ .04 $ .02 $ .11 $ .06
Weighted average number of
common and common equivalent
shares outstanding:
Primary 9,242,164 7,115,098 8,763,683 6,909,105
Fully duluted 9,374,925 7,131,381 9,038,816 7,070,081
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(Unaudited) Nine Months Ended
September 30
1996 1995
<S> <C> <C>
Cash flows provided by operations:
Net income $ 963,340 $ 390,040
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 136,844 133,463
Write-off of investments 29,021 50,000
Other 176 (334)
Decrease (increase) in current
receivables 247,477 (89,351)
Increase in inventories (1,353,485) (1,640,625)
Decrease in prepaid expenses 131,019 175,815
Increase in payables and accrued
liabilities 326,142 28,054
Increase in due to Roxane 1,505,121 2,161,238
Net cash provided by operating
activities 1,985,657 1,208,300
Cash flows used in investing activities:
(Purchase) sale of equipment, net (68,746) 28,249
(Purchase) sale of short-term
investments, net (14,883,059) 9,297
Investment in and subordinated
debenture from Romark
Laboratories, L.C. 1,675,910) (500,000)
Net cash used in investing
activities (16,627,715) (462,454)
Cash flows provided by financing
activities:
Collection of note receivable 132,252 - - -
Proceeds from issuance of stock 10,375,500 152,377
Issuance of note receivable - - - (132,252)
Deferred research and development
revenue, net 653,697 500,000
Net cash provided by financing
activities 11,161,449 520,125
(Decrease) increase in cash and cash
equivalents (3,480,609) 1,265,971
Cash and cash equivalents at beginning of
period 7,011,843 6,101,093
Cash and cash equivalents at end of
period $ 3,531,234 $ 7,367,064
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 5,769 $ 1,663
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
NOTE 1
The condensed consolidated financial information herein is
unaudited, other than the Condensed 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'') 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 September
30, 1996, the results of operations for the three and nine months
ended September 30, 1996 and 1995 and changes in cash flows for the
nine-month period ended September 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.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Nine Months Ended September 30, 1996 vs. Nine Months Ended September
30, 1995
Total revenue for the nine months ended September 30, 1996 increased
11% over total revenue for the nine months ended September 30, 1995.
Total revenue consists of net sales and research and development
revenue. Net income was $963,340 or eleven cents per share for the
nine months ended September 30, 1996. Net income for the nine
months ended September 30, 1995 was $390,040 or six cents per share.
Net sales for the nine months ended September 30, 1996 increased 2%
or $104,668 to $5,337,514 compared to net sales of $5,232,846 for
the nine months ended September 30, 1995. The increase in net sales
was attributable to a $1,093,784 increase in Marinol[R] (dronabinol)
sales, representing a 26% increase, for the nine months ended
September 30, 1996, 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[R] (betahistine HCl) to Solvay-Duphar
as of January 1, 1996 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 nine month period ended September 30, 1996,
whereas, net sales from Serc were $771,270 for the nine months ended
September 30, 1995 and net sales of over-the-counter products were
$217,846 for the nine months ended September 30, 1995. The increase
in Marinol sales for the nine month period ended September 30, 1996
from $4,243,730 to $5,337,514 was due to higher unit volume and a
price increase in the United States, as well as the launch of
Marinol in South Africa. Marinol is currently the sole source of
product sales to the Company.
Total revenue included $554,518 in research and development revenue
in the nine month period ended September 30, 1996 from foreign
licensors' partial support of clinical development programs.
$1,653,697 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 was $755,998 in the nine month period ended
September 30, 1996, $435,417 higher than in the nine month period
ended September 30, 1995 primarily due to higher investment
balances.
<PAGE>
Cost of sales increased by $52,905 or 2% for the nine month period
ended September 30, 1996 compared to the nine month period ended
September 30, 1995. This increase is due to the corresponding
increase in Marinol sales and a provision for obsolete inventory,
offset by lower Marinol inventory costs in 1996 and discontinuation
of Serc and the Company's over-the-counter products. Cost of sales
expressed as a percent of net sales was 44% for both nine month
periods ended September 30, 1996 and 1995, respectively.
Operating and administrative expenses increased for the nine months
ended September 30, 1996 by $23,539 or 1%. Operating and
administrative expenses as a percentage of net sales were 31% for
both nine month periods ended September 30, 1996 and 1995,
respectively.
Sales and marketing expenses increased $103,290 or 13% in the nine
month period ended September 30, 1996 as the Company added a new
executive responsible for commercial development of new and acquired
products. Sales and marketing expenses expressed as a percent of
net sales increased to 17% from 15% for the same period in 1995.
Research and development expenses during the nine months ended
September 30, 1996 were $1,264,058 compared to $535,156 in the same
period in 1995. Research and development expenses were 24% of net
sales for the nine months ended September 30, 1996, and 10% 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 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 products.
The research and development expenses of $1,264,058 were partially
offset by research and development revenue of $554,518 in the nine
months ended September 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.
<PAGE>
Three Months Ended September 30, 1996 vs. Three Months Ended
September 30, 1995
Total revenue for the three months ended September 30, 1996
increased 20% over total revenue for the three months ended
September 30, 1995. Total revenue consists of net sales and
research and development revenue. Net income was $391,864 or four
cents per share for the three months ended September 30, 1996. Net
income for the three months ended September 30, 1995 was $146,214 or
two cents per share.
Net sales for the three months ended September 30, 1996 were
$2,088,692, representing an increase of 9% or $167,456 compared to
net sales of $1,921,236 for the three months ended September 30,
1995. The increase is attributable to a 31% increase in Marinol
sales related to higher unit volume and a price increase in the
United States, and the launch of Marinol in South Africa. 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 January
1, 1996 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 September 30, 1996, whereas, net sales from Serc
were $271,713 for the three months ended September 30, 1995 and net
sales of over-the-counter products were $57,561 for the three months
ended September 30, 1995. Marinol is currently the sole source of
product sales to the Company.
Total revenue included $309,815 in research and development revenue
in the three month period ended September 30, 1996 from foreign
licensors' partial support of clinical development programs.
$1,653,697 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 $195,677, or 194%, to $296,324 in the
three month period ended September 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 decreased by $31,750 or 4% for the three month period
ended September 30, 1996 compared to the three month period ended
September 30, 1995. This decrease is due to a lower Marinol
inventory cost in 1996 and discontinuation of Serc and the Company's
over-the-counter products. The decrease was offset by a
corresponding increase in Marinol sales. Cost of sales expressed as
a percent of net sales decreased to 41% from 46% for the same period
in 1995.
<PAGE>
Operating and administrative expenses increased during the three
month period ended September 30, 1996 by $46,917 or 9%. Operating
and administrative expenses as a percentage of net sales were 27%
for both three month periods ended September 30, 1996 and 1995,
respectively.
Sales and marketing expenses increased $125,406 or 49% in the three
month period ended September 30, 1996. Sales and marketing expenses
were 18% of net sales in the three month period ended September 30,
1996 compared to 13% for the same period in 1995. The increase was
attributable to the Company adding a new executive responsible for
commercial development of new and acquired products.
Research and development expenses in the three month period ended
September 30, 1996 were $488,149, compared to $291,778 in the same
period ended in 1995. Research and development expenses were 23%
and 15% of net sales for the three month periods ended September 30,
1996 and 1995, respectively. The increase is due to clinical
development of NTZ, Androgel and Androgel-DHT which included the
addition of clinical and regulatory staff to manage clinical
development programs. The research and development expenses of
$488,149 were partially offset by research and development revenue
of $309,815 for the three months ended September 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.
<PAGE>
Liquidity
At September 30, 1996, the Company had cash, cash equivalents and
short-term investments of $19,803,049 compared to $8,400,599 at
December 31, 1995, an increase of $11,402,450.
The Company generated net cash from operations totaling $1,985,657
for the nine months ended September 30, 1996. Inventories increased
$1,353,485 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 nine month period ended
September 30, 1996, the distributor advanced the Company $1,505,121.
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 approximately to the cost of Marinol
inventory sold during the quarter.
The Company generated $10,375,500 from the issuance of common stock
during the nine month period ended September 30, 1996. Net proceeds
of $7,537,563 were received from a private placement of the
Company's common stock. $1,677,286 was received from exercised
stock warrants owned by the Company's Chairman. $671,726 was
received in the nine month period ended September 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 $488,925. The Company also received $311,075 for
the sublicense of product rights in Canada to NTZ, Androgel and
Androgel-DHT. Successful development of the Androgel products may
result in additional equity investment and milestone payments from
BioChem Therapeutic Inc.
In the third quarter, the Company acquired an interest-bearing
convertible-subordinated debenture from Romark Laboratories, L.C.
for $1,500,000, as further defined by the debenture agreement. The
debenture has a five-year term with interest payable to Unimed
annually.
Statements made in this document that present information that is
not historic, including among other things, anticipated financial
performance, business prospects, new products and markets, and
research and development activities, are forward-looking statements.
The risks that may affect operations, development and results
include clinical outcomes in drug development programs, regulatory
matters, proprietary rights challenges, market acceptance,
competition, and other matters discussed in the Company's Form 10-K
and other periodic reports.
<PAGE>
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) Exhibit 27 Financial
Data Schedule
(b) Reports on Form 8-K None
<PAGE>
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 5, 1996 By: /s/ Stephen M. Simes
Stephen M. Simes
President and Chief Executive Officer
Date: November 5, 1996 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,531
<SECURITIES> 16,272
<RECEIVABLES> 1,836
<ALLOWANCES> 0
<INVENTORY> 4,681
<CURRENT-ASSETS> 26,465
<PP&E> 1,984
<DEPRECIATION> 1,181
<TOTAL-ASSETS> 30,129
<CURRENT-LIABILITIES> 8,150
<BONDS> 0
0
0
<COMMON> 2,190
<OTHER-SE> 19,789
<TOTAL-LIABILITY-AND-EQUITY> 30,129
<SALES> 5,338
<TOTAL-REVENUES> 5,892
<CGS> 2,354
<TOTAL-COSTS> 6,192
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 967
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