cantors reply to tilson

After rallying yesterday in the wake of another supply agreement announcement, UNIS shares are under heavy pressure following the publication of an email from hedge fund manager Whitney Tilson to a blog site called ValueWalk (click here) in which he discloses that he is short UNIS and refers to the company as “an obvious fraud.” For an explanation of why he believes this, Tilson links to a blog post from two weeks ago (see here) that we have since refuted.

We respectfully disagree with Tilson’s position and point to the five supply agreements that UNIS has signed since Labor Day. The two deals about which we have specific economic information – Sanofi and Hikma – represent and significant long-term revenue opportunity that we believe should put to rest any concerns about UNIS’ ability to make it as a going concern. With a meaningful revenue ramp likely to begin in late 2014, near-term liquidity concerns bear little consequence to us; any potential capital raise would merely serve as a bridge to 2015, when revenue growth accelerates.

As for the other deals, while we have few details, we know that two are with important partners (Novartis and MedImmune) and the other (yesterday’s deal for UNIS’ Ocu-ject ocular drug delivery system with an unnamed partner) could be significant if it is, as we suspect, for macular degeneration (which would mean another very large partner).

Execution will of course be critical over the next 4-8 quarters as revenue/earnings results receive extra scrutiny. And the company will also have to produce more supply agreements to compensate for missing management’s initial target of 10-12 deals in 2013. But ultimately we still see a significant upside opportunity over the long-term. Please see our most recent note for our detailed estimates and for necessary disclosures.

Jeremy Feffer / Cantor Fitzgerald