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, 1998 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 Identification Number)
of incorporation or organization)
2150 E. Lake Cook Rd., 60089
Buffalo Grove, Illinois
(Address of principal executive offices) (Zip Code)
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 8,943,444
($.25 par value)
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Page
Number
PART I. Financial Information
ITEM 1. Financial Statements
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 Condition 8
PART II. Other Information 11
SIGNATURE PAGE 12
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, December 31,
1998 1997
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,441,323 $ 1,068,279
Short-term investments 6,997,709 13,718,834
Receivables:
Trade 4,233,991 1,661,042
Other 129,314 116,978
Total receivables 4,363,305 1,778,020
Inventories 3,809,792 4,386,904
Prepaid expenses 309,147 407,698
Total current assets 19,921,276 21,359,735
Equipment and leasehold
improvements, at cost 2,627,983 2,555,857
Less accumulated depreciation and
amortization 1,527,577 1,452,217
Net 1,100,406 1,103,640
Product rights, net of
amortization 1,596,592 1,626,349
Total assets $22,618,274 $24,089,724
See accompanying notes to consolidated financial statements.
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<TABLE>
Item 1 - Financial Statements
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, December 31,
1998 1997
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,085,090 $ 1,812,030
Accrued and other liabilities 2,757,090 1,806,687
Due to Roxane Laboratories, Inc. 3,290,255 3,616,665
Current portion of long-term obligation 1,419,910 914,836
Total current liabilities 9,552,345 8,150,218
Long-term obligation 0 1,213,000
Total liabilities 9,552,345 9,363,218
Stockholders' equity:
Common stock, $.25 par value; authorized
30,000,000 shares; issued and outstanding:
9,051,944 and 9,040,942, respectively 2,262,986 2,260,236
Additional paid-in capital 28,245,145 28,201,420
Accumulated deficit (16,922,135) (15,215,214)
Accumulated other comprehensive income
(Note 2) 41,391 41,522
13,627,387 15,287,964
Less: treasury stock at cost (108,500
shares at March 31, 1998 and December 31,
1997, respectively) (561,458) (561,458)
Total stockholders' equity 13,065,929 14,726,506
Total liabilities and stockholders'
equity $22,618,274 $24,089,724
See accompanying notes to consolidated financial statements.
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UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net sales $ 4,013,622 $ 1,970,883
Cost of sales 905,921 593,400
Gross profit 3,107,701 1,377,483
Operating and administrative expenses 793,756 781,464
Sales and marketing expenses 2,083,905 485,450
Research and development expenses, net 2,104,882 276,403
Total expenses 4,982,543 1,543,317
(Loss) from operations (1,874,842) (165,834)
Other income (expense):
Interest income 198,630 274,908
Product right sublicense gain - - - 150,000
Other expense
(30,709) (11,333)
(Loss) income before income taxes (1,706,921) 247,741
Income tax provision - - - - - -
Net (loss) income $(1,706,921) $ 247,741
Net (loss) income per share:
Basic $ (.19) $ .03
Diluted $ (.19) $ .03
Weighted average number of common and
common equivalent shares outstanding:
Basic 8,937,294 8,780,790
Diluted 9,189,348 9,113,948
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
UNIMED PHARMACEUTICALS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
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Cash flows (used in) provided by
operations:
Net (loss) income $(1,706,921) $ 247,741
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operations:
Depreciation and amortization 105,118 69,688
(Increase) Decrease in receivables (2,585,285) 258,224
Decrease in inventories 577,112 410,061
Decrease (Increase) in prepaid
expenses and other 98,420 (151,363)
Increase in payables, accrued and
other liabilities 1,307,036 75,082
(Decrease) in due to Roxane
Laboratories, Inc. (326,410) (513,859)
Net cash (used in) provided by
operating activities (2,530,930) 395,574
Cash flows provided by (used in)
investing activities:
Capital expenditures, net (72,126) (92,342)
Sale (Purchase) of short-term
investments, net 6,721,125 2,413,044
Product rights acquisition - - - (3,000,000)
Net cash provided by (used in)
investing activities 6,648,999 (679,298)
Cash flows (used in) financing
activities:
Proceeds from issuance of common
stock 46,475 20,625
Payments for product acquisition
obligations (791,500) - - -
Deferred research and development
revenues, net - - - (434,287)
Net cash (used in) financing
activities (745,025) (413,662)
Increase (Decrease) in cash and cash
equivalents 3,373,044 (697,386)
Cash and cash equivalents at beginning
of period 1,068,279 4,458,889
Cash and cash equivalents at end of
period $ 4,441,323 $3,761,503
Supplemental disclosures of cash flow
information:
Obligation assumed due to product
rights acquisitions,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
March 31, 1998
(Unaudited)
NOTE 1
The condensed consolidated financial information herein is
unaudited, other than the Condensed Consolidated Balance Sheet at
December 31, 1997, 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, 1998, the results of operations for the three months ended
March 31, 1998 and 1997 and changes in cash flows for the three
month periods ended March 31, 1998 and 1997.
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 1997 annual report on Form 10-K/A filed with the
Securities and Exchange Commission.
NOTE 2
During the three months ended March 31, 1998, the Company adopted
the provisions of Statement of Financial Accounting Standards No.
130, _Reporting Comprehensive Income_. Total comprehensive income
for the three months ended March 31, 1998 and 1997 was $131 and
$208, respectively.
As of March 31, 1998 and December 31, 1997, accumulated other
comprehensive income, as reflected on the consolidated balance
sheets, was comprised of the following:
<TABLE>
March 31, December 31,
1998 1997
<S> <C> <C>
Currency translation adjustment $41,391 $41,522
Accumulated other
comprehensive income $41,391 $41,522
</TABLE>
NOTE 3
Certain amounts for 1997 were reclassified to conform to current
year presentation.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three Months Ended March 31, 1998 vs. Three Months Ended March 31,
1997
Net loss for the three months ended March 31, 1998 (the "Fiscal
1998 Period") was $1,706,921 or nineteen cents per share (basic).
Net income for the three months ended March 31, 1997 (the "Fiscal
1997 Period") was $247,741 or three cents per share (basic).
Net sales for the Fiscal 1998 Period increased by 104% or
$2,042,739 to $4,013,622 compared to net sales of $1,970,883 for
the Fiscal 1997 Period. The increase in net sales was attributable
to a combination of a 27% sales increase in Marinol[R] (dronabinol)
and a 69% sales increase in Maxaquin[R] (lomefloxacin), both due to
higher unit volume, and to the introduction of Anadrol[R]
(oxymetholone), an orally active anabolic androgenic steroid used
to treat various anemias, which generated net sales of $1,449,974
in February and March. This initial sales volume is attributable
to stocking the product distribution channels.
Cost of sales increased by $312,521 or 53% for the three month
period ended March 31, 1998 compared to the three month period
ended March 31, 1997. This increase is due to higher unit sales
volume. Cost of sales expressed as a percent of net sales
decreased from 30% for the Fiscal 1997 Period to 23% for the same
period in 1998. This decrease is due to a combination of lower
Marinol inventory costs and Maxaquin and Anadrol product costs
which are lower than those of Marinol.
Operating and administrative expenses increased in the Fiscal 1998
Period by $12,292 or 2%. Operating and administrative expenses as
a percentage of net sales were 20% in the Fiscal 1998 Period
compared to 40% in the Fiscal 1997 Period.
Sales and marketing expenses increased $1,598,455 to $2,083,905 in
the Fiscal 1998 Period as the Company launched Anadrol and began
Anadrol related promotional programs as well as adding an
integrated sales and marketing infrastructure that can provide for
the coordinated introduction of Anadrol to targeted markets. Sales
and marketing expenses were 52% of net sales in the Fiscal 1998
Period compared to 25% in the Fiscal 1997 Period.
<PAGE>
Net research and development expenses in the Fiscal 1998 Period
were $2,104,882 (research and development expenses of $2,150,489
less research and development revenues of $45,607), compared to
$276,403 (research and development expenses of $719,130 less
research and development revenues of $442,727) in the Fiscal 1997
Period. Research and development expenses were 52% of net sales
for the Fiscal 1998 Period, and 14% of net sales for the Fiscal
1997 Period. This increase is due to clinical development which
included the acceleration of the two Phase III studies related to
Androgel[TM] and Andractim[TM], the Company's two male testosterone
replacement products, and the addition of clinical and regulatory
staff to manage clinical development programs.
Liquidity and Capital Resources
At March 31, 1998, the Company had cash, cash equivalents and
short-term investments of $11,439,032, compared to $14,787,113 at
December 31, 1997, a decrease of $3,348,081. This decrease is
primarily the result of payments on obligations due to product
acquisitions, an increase in clinical development expenditures as
the Company continues to accelerate Phase III clinical trials, and
continued expansion of its sales and marketing efforts, including,
but not limited to, the launch of Anadrol.
The Company used net cash in operations totaling $2,530,930 for the
quarter ended March 31, 1998. Current receivables increased by
$2,585,285 due primarily to the launch and subsequent stocking of
Anadrol under favorable extended payment terms. Inventories
decreased $98,420 due to ongoing product sales and the timing of
new inventory deliveries. Accrued and other liabilities increased
$950,403 due primarily to the reduction in gross sales for
anticipated Anadrol-related rebates, chargebacks, returns and
discounts.
Year 2000 Program
The Company will continue to conduct a comprehensive review of its
computer systems to identify the systems that could be affected by
the _Year 2000_ issue and is developing an implementation plan to
resolve the issue. The Company presently believes that, with
modifications to existing software and converting to new software,
the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified and
converted. However, if such modifications and conversions are not
completed in a timely manner, the Year 2000 problem may have a
material impact on the operations of the Company.
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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 None
of Security Holders
Item 5. Other Information None
Item 6. Exhibits and Reports on Form
8-K
(a) Exhibits None
(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: May 15, 1998 By: ________/s/ Ronald L. Goode_______
Ronald L. Goode
President and Chief Executive Officer
Date: May 15, 1998 By: ________/s/ David E. Riggs_________
David E. Riggs
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,441
<SECURITIES> 6,998
<RECEIVABLES> 4,363
<ALLOWANCES> 0
<INVENTORY> 3,810
<CURRENT-ASSETS> 19,921
<PP&E> 2,628
<DEPRECIATION> 1,528
<TOTAL-ASSETS> 22,618
<CURRENT-LIABILITIES> 9,552
<BONDS> 0
0
0
<COMMON> 2,263
<OTHER-SE> 10,803
<TOTAL-LIABILITY-AND-EQUITY> 22,618
<SALES> 4,014
<TOTAL-REVENUES> 4,014
<CGS> 906
<TOTAL-COSTS> 5,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,707)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,707)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,707)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
