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, 1997 Commission file number 0-3390
UNIMED PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-1685346
(State or other (I.R.S. Employer
jurisdiction of incorporation or Identification Number)
organization)
2150 E. Lake Cook Rd., 60089
Buffalo Grove, Illinois (Zip Code)
(Address of principal
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 8,870,299
($.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
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated 7
Financial Statements
ITEM 2. Management's Discussion and Analysis of
Results of Operations and Financial 8
Condition
PART II. Other Information 11
SIGNATURE PAGE 12
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September December
30, 31,
1997 1996
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,150,324 $4,458,889
Short-term investments 14,082,449 16,370,897
Receivables:
Trade 1,600,933 1,876,807
Other 108,912 78,109
Total receivables 1,709,845 1,954,916
Inventories 3,744,325 4,184,855
Prepaid expenses 262,677 108,457
Total current assets 21,949,620 27,078,014
Equipment and leasehold
improvements, at cost 2,457,022 2,035,807
Less accumulated depreciation and
amortization 1,383,918 1,227,790
Net 1,073,104 808,017
Investment in, and subordinated
debenture from,
Romark Laboratories, L.C. 2,275,910 2,275,910
Product rights, net of
amortization 6,071,775 584,934
Total assets $31,370,409 $30,746,875
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
September December
30, 1997 31, 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 657,513 $ 376,761
Accrued and other liabilities 982,343 1,210,664
Due to Roxane Laboratories, Inc. 4,017,504 4,945,801
Deferred research and development revenues 411,145 1,643,887
Current portion of long-term obligation 1,034,836 - - -
Total current liabilities 7,103,341 8,177,113
Long-term obligation 1,213,000 - - -
Total liabilities 8,316,341 8,177,113
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 shares; issued and outstanding:
8,968,799 and 8,775,499, respectively 2,242,200 2,193,875
Additional paid-in capital 27,824,405 27,340,665
Accumulated deficit (6,491,971) (7,005,726)
Accumulated foreign currency translation
adjustment 40,892 40,948
23,615,526 22,569,762
Less: treasury stock at cost (98,500 and
0 shares at September 30, 1997 and
December 31, 1996, respectively) (561,458) - - -
Total stockholders' equity 23,054,068 22,569,762
Total liabilities and stockholders'
equity $ 31,370,409 $ 30,746,875
See accompanying notes to consolidated financial statements.
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $2,864,203 $2,088,692 $6,657,026 $5,337,514
Research and development
revenue 527,851 309,815 1,272,911 554,518
Total revenue 3,392,054 2,398,507 7,929,937 5,892,032
Cost of sales 1,045,803 855,539 2,264,315 2,354,236
Gross profit 2,346,251 1,542,968 5,665,622 3,537,796
Operating and administrative
expenses 561,826 572,202 1,825,552 1,644,510
Sales and marketing expenses 886,445 379,075 1,923,857 899,871
Research and development
expenses 1,077,178 488,149 2,420,877 1,264,058
Total expenses 2,525,449 1,439,426 6,170,286 3,808,439
(Loss) income from operations (179,198) 103,542 (504,664) (270,643)
Other income (expense):
Interest income 259,049 296,324 797,605 755,998
Product right sublicense gain 150,000 - - - 300,000 311,075
Gain on sale of trademark - - - - - - - - - 200,000
Other expense (33,937) (8,002) (79,186) (29,021)
Income before income taxes 195,914 391,864 513,755 967,409
Income tax expense - - - - - - - - - 4,069
Net income $ 195,914 $ 391,864 $ 513,755 $ 963,340
Net income per share:
Primary $ .02 $ .04 $ .06 $ .11
Fully diluted $ .02 $ .04 $ .06 $ .11
Weighted average number of
common and common equivalent
shares outstanding:
Primary 8,882,573 9,242,164 8,879,161 8,763,683
Fully diluted 9,072,380 9,374,925 9,189,348 9,038,816
See accompanying notes to consolidated financial statements.
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows provided from operations:
Net income $ 513,755 $ 963,340
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 335,466 136,844
Write-off of investments - - - 29,021
Decrease in receivables 245,015 247,655
Decrease (Increase) in inventories 440,530 (1,353,485)
(Increase) Decrease in prepaid
expenses (154,220) 131,019
Decrease in payables, accrued and
other liabilities 52,431 326,142
(Decrease) Increase in due to Roxane
Laboratories, Inc. (928,297) 1,505,121
Net cash provided from operating
activities 504,680 1,985,657
Cash flows used in investing
activities:
Capital expenditures, net (463,558) (68,746)
Sale (Purchase) of short-term
investments, net 2,288,448 (14,883,059) )
Investment in and subordinated
debenture from
Romark Laboratories, L.C. - - - (1,675,910)
Product rights acquisition (3,376,000) - - -
Net cash used in investing
activities (1,551,110) (16,627,715)
Cash flows (used in) provided from
financing activities:
Acquisition of treasury stock (561,458) - - -
Proceeds from payment of note
receivable - - - 132,252
Proceeds from issuance of common
stock 532,065 10,375,500
Deferred research and development
revenues, net (1,232,742) 653,697
Net cash (used in) provided from
financing activities (1,262,135) 11,161,449
Decrease in cash and cash equivalents (2,308,565) (3,480,609)
Cash and cash equivalents at beginning
of period 4,458,889 7,011,843
Cash and cash equivalents at end of
period $ 2,150,324 $ 3,531,234
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Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ - - - $ 5,769
Obligation assumed due to product
rights acquisitions,
including imputed interest $ 2,247,836 $ - - -
See accompanying notes to consolidated financial statements.
</TABLE>
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 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
September 30, 1997, the results of operations for the three and
nine months ended September 30, 1997 and 1996 and changes in cash
flows for the nine month periods ended September 30, 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.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Nine Months Ended September 30, 1997 vs. Nine Months Ended
September 30, 1996
Total revenue for the nine months ended September 30, 1997
increased 35% over total revenue for the nine months ended
September 30, 1996. Total revenue consists of net sales and
research and development revenue. Net income was $513,755 or six
cents per share for the nine months ended September 30, 1997. Net
income for the nine months ended September 30, 1996 was $963,340 or
eleven cents per share.
Net sales for the nine months ended September 30, 1997 increased
25% or $1,319,512 to $6,657,026 compared to net sales of $5,337,514
for the nine months ended September 30, 1996. The increase in net
sales was attributable to a combination of a 12% sales increase in
Marinol[R] (dronabinol) due to higher unit volume and the
introduction in March of Maxaquin[R] (lomefloxacin), which
generated sales of $670,379 for the period ending September 30,
1997.
Total revenue, in addition to net sales, included $1,272,911 in
research and development revenue recognized in the nine month
period ended September 30, 1997, a $718,393 increase over research
and development recognized in the nine month period ended September
30, 1996. The Company expects to recognize the remaining deferred
research and development revenue prior to the end of 1997.
Cost of sales decreased slightly by $89,921 or 4% for the nine
month period ended September 30, 1997 compared to the nine month
period ended September 30, 1996. This decrease is due primarily to
lower Marinol raw material costs. Cost of sales expressed as a
percent of net sales decreased to 34% for the nine month period
ended September 30, 1997 from 44% for the same period in 1996. This
decrease is primarily attributable to lower Marinol raw material
costs.
Operating and administrative expenses increased for the nine months
ended September 30, 1997 by $181,042 or 11%. This increase is due
in part to personnel-related expenses and expenses associated with
expansion of the corporate headquarters. Operating and
administrative expenses as a percentage of net sales were 27% and
31% in the nine month periods ended September 30, 1997 and 1996,
respectively.
<PAGE>
Sales and marketing expenses increased $1,023,986 or 114% in the
nine month period ended September 30, 1997 as the Company began
Maxaquin-related product launch programs and expanded the sales
force, sales management and managed care groups. Sales and
marketing expenses were 29% and 17% of net sales for the nine month
periods ended September 30, 1997 and 1996, respectively.
Research and development expenses during the nine months ended
September 30, 1997 were $2,420,877 compared to $1,264,058 in the
same period in 1996. Research and development expenses were 36% of
net sales for the nine months ended September 30, 1997 and 24 % of
net sales for the same period in 1996. The increase is due to
accelerated clinical development which included the addition of
clinical and regulatory staff to manage clinical development
programs. Research and development expenses of $2,420,877 were
partially offset by research and development revenue of $1,272,911
recognized in the nine months ended September 30, 1997. Research
and development expenses of $1,264,058 for the nine month period
ended September 30, 1996 were partially offset by research and
development revenues of $554,518.
The Company expects research and development expenses to increase
as planned product development continues and to be partially offset
by research and development revenues through the end of 1997.
<PAGE>
Three Months Ended September 30, 1997 vs. Three Months Ended
September 30, 1996
Total revenue for the three months ended September 30, 1997
increased 41% over total revenue for the three months ended
September 30, 1996. Total revenue consists of net sales and
research and development revenue. Net income was $195,914 or two
cents per share for the three months ended September 30, 1997. Net
income for the three months ended September 30, 1996 was $391,864
or four cents per share.
Net sales for the three months ended September 30, 1997 were
$2,864,203, representing an increase of 37% or $775,511 compared to
net sales of $2,088,692 for the three months ended September 30,
1996. The increase in net sales was attributable to a combination
of a 20% increase in Marinol sales for the quarter ended September
30, 1997 and the introduction in March of Maxaquin which generated
net sales of $355,178 for the quarter.
Total revenue, in addition to net sales, included $527,851 in
research and development revenue recognized in the three month
period ended September 30, 1997. The Company expects to recognize
the remaining deferred research and development revenue prior to
the end of 1997.
Cost of sales increased by $190,264 or 22% for the three month
period ended September 30, 1997 compared to the three month period
ended September 30, 1996. This increase is due to the
corresponding increase in Marinol sales and an increase in the
reserve for inventory. Cost of sales expressed as a percent of net
sales decreased to 37% from 41% for the same period in 1996 due to
lower Marinol raw material costs.
Operating and administrative expenses decreased slightly during the
three month period ended September 30, 1997 by $10,376 or 2%.
Operating and administrative expenses as a percentage of net sales
were 20% in the three months ended September 30, 1997 compared to
27% for the same period in 1996.
Sales and marketing expenses increased $507,370 or 134% in the
three month period ended September 30, 1997 as the Company promoted
Maxaquin-related product launch programs and expanded the sales
force, sales management and managed care groups. Sales and
marketing expenses were 31% of net sales in the three month period
ended September 30, 1997 compared to 18% for the same period in
1996.
Research and development expenses in the three month period ended
September 30, 1997 were $1,077,178, compared to $488,149 in the
same period ended in 1996. Research and development expenses were
38% and 23% of net sales for the three month periods ended
September 30, 1997 and 1996, respectively. The increase is
due to accelerated clinical development which included the addition
of clinical and regulatory staff to manage clinical development
programs. The research and development expenses of $1,077,178 were
offset by research and development revenue of $527,851 recognized
in the three months ended September 30, 1997. For the same three
month period in 1996, research and development expenses of $488,149
were partially offset by research and development revenues of
$309,815.
<PAGE>
Liquidity and Capital Resources
At September 30, 1997, the Company had cash and cash equivalents
and short-term investments of $16,232,773 compared to $20,829,786
at December 31, 1996, a decrease of $4,597,013. This decrease is
primarily the result of the acquisition of the two new products
referred to below and research and development costs.
The Company generated net cash from operations totaling $504,680
for the nine months ended September 30, 1997. Current receivables
decreased by $245,071 due to receipt of cash due under a royalty
payment from the Company's distributor of Marinol. Inventories
decreased $440,530 due to ongoing sales of Marinol 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 rights 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 paid January 2, 1998 and 1999, respectively.
In May 1997, the Company initiated a stock repurchase program. To
date, this program and other stock repurchases have accounted for a
decrease in cash of $561,458.
In July 1997, the Company acquired from Syntex all rights to
oxymethelone, an orally active anabolic androgenic steroid used to
treat anemias, for the United States, Mexico and Canada. The
Company will pay to Syntex a licensing fee, in three installments,
and a royalty on net product sales. The Company paid the first
installment in July.
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.
<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 14, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,150
<SECURITIES> 14,082
<RECEIVABLES> 1,710
<ALLOWANCES> 0
<INVENTORY> 3,744
<CURRENT-ASSETS> 21,950
<PP&E> 2,457
<DEPRECIATION> 1,384
<TOTAL-ASSETS> 31,370
<CURRENT-LIABILITIES> 7,103
<BONDS> 0
0
0
<COMMON> 2,242
<OTHER-SE> 20,812
<TOTAL-LIABILITY-AND-EQUITY> 31,370
<SALES> 6,657
<TOTAL-REVENUES> 7,930
<CGS> 2,264
<TOTAL-COSTS> 8,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 514
<INCOME-TAX> 0
<INCOME-CONTINUING> 514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 514
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
