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, 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 of (I.R.S. Employer Identification
incorporation or organization) Number)
2150 E. Lake Cook Rd., 60089
Buffalo 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 8,868,299
($.25 par value)
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Page
Number
PART I. Financial Information
Financial Statements
ITEM 1.
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of 5
Operations
Condensed Consolidated Statements of Cash 6
Flows
Notes to Condensed Consolidated Financial 7
Statements
Management's Discussion and Analysis of 8
ITEM 2. Results of Operations and Financial
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
June 30, December 31,
1997 1996
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,229,911 $ 4,458,889
Short-term investments 14,067,094 16,370,897
Receivables:
Trade 1,165,576 1,876,807
Other 167,063 78,109
Total receivables 1,332,639 1,954,916
Inventories 4,146,676 4,184,855
Prepaid expenses 310,776 108,457
Total current assets 23,087,096 27,078,014
Equipment and leasehold
improvements, at cost 2,379,809 2,035,807
Less accumulated depreciation and
amortization 1,321,464 1,227,790
Net 1,058,345 808,017
Investment in and subordinated
debenture from Romark
Laboratories, L.C. 2,275,910 2,275,910
Product rights, net of
amortization 5,203,652 584,934
Total assets $31,625,003 $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
June 30, December 31,
1997 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 219,694 $ 376,761
Accrued and other liabilities 1,110,210 1,210,664
Due to Roxane Laboratories, Inc. 4,741,733 4,945,801
Deferred research and development revenues 929,132 1,643,887
Current portion of long-term obligation 484,000 - - -
Total current liabilities 7,484,769 8,177,113
Long-term obligation 1,213,000 - - -
Total liabilities 8,697,769 8,177,113
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 shares; issued and outstanding:
8,958,799 and 8,775,499 2,239,700 2,193,875
Additional paid-in capital 27,797,360 27,340,665
Accumulated deficit (6,687,885) (7,005,726)
Accumulated foreign currency translation
adjustment 41,035 40,948
23,390,210 22,569,762
Less: treasury stock at cost (90,500 and
0 shares at respective dates) (462,976) - - -
Total stockholders' equity 22,927,234 22,569,762
Total stockholders' equity and
liabilities $31,625,003 $30,746,875
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $1,821,940 $1,692,575 $3,792,823 $3,248,822
Research and development
revenue 302,333 72,523 745,060 244,703
Total revenue 2,124,273 1,765,098 4,537,883 3,493,525
Cost of sales 625,112 820,146 1,218,512 1,498,697
Gross profit 1,499,161 944,952 3,319,371 1,994,828
Operating and administrative
expenses 482,262 512,972 1,263,726 1,072,308
Sales and marketing expenses 551,962 302,017 1,037,412 520,796
Research and development
expenses 624,569 344,838 1,343,699 775,909
Total expenses 1,658,793 1,159,827 3,644,837 2,369,013
Loss from operations (159,632) (214,875) (325,466) (374,185)
Other income (expense):
Interest income 263,648 265,837 538,556 459,674
Product right sublicense
gain - - - 311,075 150,000 311,075
Gain on sale of trademark - - - - - - - - - 200,000
Other expense (33,916) - - - (45,249) (21,019)
Income before income taxes 70,100 362,037 317,841 575,545
Income tax expense - - - 10,000 - - - 4,069
Net income $70,100 $352,037 $317,841 $571,476
Net income per share:
Primary $.01 $.04 $.04 $.07
Fully diluted $.01 $.04 $.03 $.07
Weighted average number of
common and common equivalent
shares outstanding:
Primary 8,886,024 9,268,939 8,833,727 8,557,441
Fully diluted 9,069,464 9,300,710 9,224,899 8,790,838
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(Unaudited)
Six Months Ended
June 30,
<S> 1997 1996
Cash flows provided by operations: <C> <C>
Net income $ 317,841 $ 571,476
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 212,374 90,249
Write-off of Investment in Medisperse - - - 21,019
Other 86 1,949
Decrease in current receivables 622,277 1,345,772
Decrease (Increase) in inventories 38,179 (1,639,239)
(Increase) Decrease in prepaid
expenses (202,319) 5,876
Decrease in payables, accrued and
other liabilities (257,521) (21,818)
(Decrease) Increase in due to Roxane
Laboratories, Inc. (204,068) 1,441,270
Net cash provided by operating
activities 526,849 1,816,554
Cash flows used in investing
activities:
Capital expenditures, net (384,419) (30,308)
Sale (Purchase) of short-term
investments, net 2,303,803 (14,821,262)
Product rights acquisition (3,000,000) - - -
Net cash used in investing
activities (1,080,616) (14,851,570)
Cash flows (used in) provided by
financing activities:
Acquisition of treasury stock (462,976) - - -
Proceeds from payment of note
receivable - - - 132,252
Proceeds from issuance of common
stock 502,520 10,191,114
Deferred research and development
revenues, net (714,755) 963,512
Net cash (used in) provided by
financing activities (675,211) 11,286,878
Decrease in cash and cash equivalents (1,228,978) (1,748,138)
Cash and cash equivalents at beginning
of period 4,458,889 7,011,843
Cash and cash equivalents at end of
period $3,229,911 $5,263,705
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ - - - $ 5,769
Obligation assumed due to product
rights acquisition,
including imputed interest $ 1,697,000 $ - - -
See accompanying notes to consolidated financial statements.
</TABLE>
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
June 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 June 30, 1997, the results of
operations for the three and six months ended June 30, 1997
and 1996 and changes in cash flows for the six month periods
ended June 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
Six Months Ended June 30, 1997 vs. Six Months Ended June 30,
1996
Total revenue for the six months ended June 30, 1997
increased 30 percent over total revenue for the six months
ended June 30, 1996. Total revenue consists of net sales
and research and development revenue. Net income was
$317,841 or three cents per share for the six months ended
June 30, 1997. Net income for the six months ended June 30,
1996 was $571,476 or seven cents per share.
Net sales for the six months ended June 30, 1997 increased
17 percent or $544,001 to $3,792,823 compared to net sales
of $3,248,822 for the six months ended June 30, 1996. The
increase in net sales was attributable to a combination of a
7% sales increase in Marinol [R] (dronabinol) due to higher
unit volume and the introduction in March of Maxaquin [R]
(lomefloxacin), which generated sales of $315,201 for the
period ending June 30, 1997.
Total revenue, in addition to net sales, included $745,060
in research and development revenue in the six month period
ended June 30, 1997. The Company expects to recognize the
remaining deferred research and development revenue prior to
the end of 1997.
Cost of sales decreased by $280,185 or 19 percent for the
six month period ended June 30, 1997 compared to the six
month period ended June 30, 1996. This decrease is due to
lower Marinol inventory costs. Cost of sales expressed as a
percent of net sales decreased to 32% for the six month
period ended June 30, 1997 from 46% for the same period in
1996.
Operating and administrative expenses increased for the six
months ended June 30, 1997 by $191,418 or 18 percent. 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 33% in both six month periods
ended June 30, 1997 and 1996, respectively.
Sales and marketing expenses increased $516,616 or 99% in
the six month period ended June 30, 1997 as the Company
began Maxaquin-related product launch programs and expanded
the sales force and sales management groups. Sales and
marketing expenses were 27% and 16% of net sales for the six
month periods ended June 30, 1997 and 1996, respectively.
<PAGE>
Research and development expenses during the six months
ended June 30, 1997 were $1,343,699 compared to $775,909 in
the same period in 1996. Research and development expenses
were 35% of net sales for the six months ended June 30,
1997, and 24 percent of net sales for the same period in
1996. The 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 $745,060 were offset by research and
development revenue in the six months ended June 30, 1997.
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.
Three Months Ended June 30, 1997 vs. Three Months Ended June
30, 1996
Total revenue for the three months ended June 30, 1997
increased twenty percent over total revenue for the three
months ended June 30, 1996. Total revenue consists of net
sales and research and development revenue. Net income was
$70,100 or one cent per share for the three months ended
June 30, 1997. Net income for the three months ended June
30, 1996 was $352,037 or four cents per share.
Net sales for the three months ended June 30, 1997 were
$1,821,940, representing an increase of eight percent or
$129,365 compared to net sales of $1,692,575 for the three
months ended June 30, 1996. The increase in net sales was
attributable to a combination of a 2% decrease in Marinol
sales for the quarter ended June 30, 1997 and the
introduction in March of Maxaquin which generated net sales
of $158,021 for the quarter. The Marinol sales decrease was
attributable to a decrease in foreign Marinol sales.
Total revenue, in addition to net sales, included $302,333
in research and development revenue in the three month
period ended June 30, 1997. The Company expects to
recognize the remaining deferred research and development
revenue prior to the end of 1997.
Cost of sales decreased by $195,034 or twenty-four percent
for the three month period ended June 30, 1997 compared to
the three month period ended June 30, 1996. This decrease
is due to lower Marinol inventory costs. Cost of sales
expressed as a percent of net sales decreased to 34% from
48% for the same period in 1996.
Operating and administrative expenses decreased during the
three month period ended June 30, 1997 by $30,710 or six
percent. Operating and administrative expenses as a
percentage of net sales were 26% in the three months ended
June 30, 1997 compared to 30% for the same period in 1996.
<PAGE>
Sales and marketing expenses increased $249,945 or 83% in
the three month period ended June 30, 1997 as the Company
began Maxaquin-related product launch programs and expanded
the sales force and sales management groups. Sales and
marketing expenses were 30% of net sales in the three month
period ended June 30, 1997 compared to 18% for the same
period in 1996.
Research and development expenses in the three month period
ended June 30, 1997 were $624,569, compared to $344,838 in
the same period ended in 1996. Research and development
expenses were 34% and 20% of net sales for the three month
periods ended June 30, 1997 and 1996, respectively. The
increase is due to clinical development which included the
addition of clinical and regulatory staff to manage clinical
development programs. The research and development expenses
of $624,569 were offset by research and development revenue
of $302,333 for the three months ended June 30, 1997.
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.
Liquidity
At June 30, 1997, the Company had cash, cash equivalents and
short-term investments of $17,297,005 compared to
$20,829,786 at December 31, 1996, a decrease of $3,532,781.
The Company generated net cash from operations totaling
$526,851 for the six months ended June 30, 1997. Current
receivables decreased by $622,277 due to receipt of cash due
under a foreign license agreement and a royalty from the
Company's distributor of Marinol.
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.
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 $462,976.
<PAGE>
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 None
Securities
Item 4. Submission of Matters to Vote
of Security Holders
On April 24, 1997, at the Annual Meeting of Stockholders,
the stockholders re-elected two Directors. The results
of the shareholder vote are shown below.
Broker
For Against Abstentions/ Non-
Withheld votes
John N. Kapoor 6,688,786 0 207,323 0
Roland Weiser 6,688,786 0 207,323 0
Item 5. Other Information None
Item 6. Exhibits and Reports on Form
8-K
None
(a) Exhibits
(b) Reports on Form 8-K
On June 20, 1997, the Company filed a
Current Report on Form 8-K and a
Current Report on Form 8-A to
announce the adoption of a
Stockholder Rights Plan.
<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: August 13, 1997 By: /s/ Robert E. Dudley
Robert E. Dudley
Chief Executive Officer
Date: August 13, 1997 By: /s/ David E. Riggs
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,230
<SECURITIES> 14,067
<RECEIVABLES> 1,333
<ALLOWANCES> 0
<INVENTORY> 4,147
<CURRENT-ASSETS> 23,087
<PP&E> 2,380
<DEPRECIATION> 1,321
<TOTAL-ASSETS> 31,625
<CURRENT-LIABILITIES> 7,485
<BONDS> 0
0
0
<COMMON> 2,240
<OTHER-SE> 20,687
<TOTAL-LIABILITY-AND-EQUITY> 31,625
<SALES> 3,793
<TOTAL-REVENUES> 4,538
<CGS> 1,219
<TOTAL-COSTS> 4,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 318
<INCOME-TAX> 0
<INCOME-CONTINUING> 318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
</TABLE>
