explosion time ,finally time for a re-rating.., page-8

04-Dec-2013
Morning Report
Today’s Top Pick.

Unilife Corporation (UNS, $0.84, Mkt cap $430m) – Deal flow continues, Novartis sign on – BUY PT $1.80/sh

•The news/deal flow continued yesterday with UNS announcing it had entered into an agreement with Novartis. The US market obviously appreciated another large pharmaceutical company signing on with the stock up 16% ($A equivalent, $0.89/sh) on very large volume (CDI equivalent, ~36m shares). While light on detail yesterday’s announcement adds further weight to the calibre of partners that UNS has established formal agreements with (Sanofi, AstraZeneca, Hikma and Novartis), which now include 3 of the top 10 pharmaceutical companies and credibility of the expected deal flow that management have guided.

•The agreement with Novartis is to supply clinical products from one of its platforms of injectable drug delivery systems for use with one of Novartis’s targeted early-stage pipeline drugs. Under this agreement, Unilife will supply Novartis with a customized delivery device, consisting of syringe, needle, tubing, controller and pump, to enable administration of a novel investigational Novartis drug into a targeted organ in clinical trials. Unilife has granted Novartis an option for exclusivity under this agreement.

•Due to the confidentiality clauses, which is expected for the majority of the supply agreement, the announcement was light on details surrounding expected quantum of revenue, drug type, device and stage. The development collaboration between two parties had commenced as early as 2011. Therefore we speculate that the Novartis was the un-named global pharmaceutical company in the announcement dated 30.11.2011 who UNS had entered into a supply agreement for a novel device for targeted organ delivery.

•Furthermore, we believe establishing a collaborative partnership is an important and crucial step and could results in Novartis evaluating the use of various UNS injectable platforms for use with other commercial or pipeline drugs.

•With four deals announced already announced, we believe this is the beginning of the re-rating in the company which is at a transformational point with years of investment, meticulous planning and approvals about to be translated to commercial contracts and substantial future earnings. Large volume over night also indicates the potential start of a short squeeze occurring with the last reported short position 17m vs. US free float of ~30m

•BUY price target to $1.80/sh

•We will be marketing with management through Sydney, Melbourne and Hong Kong in Late Jan 2014.