shareholder briefing review

Okay, back on deck, though would rather still be in Bondi taking in the sights...

My first impression of the presentation was that Alan was amped from the get go, on fire. Ramin was an extremely measured man with an impressive depth of experience and knowledge, and an obvious respect for everything Unilife.

1) Cross Farm

Alan started by talking about our facility at Cross Farm. The main driver here was credibility. For years, Big Pharma have been dealing with the Bectons, Medronics and Covidians of the world. They are known quantities who were able to deliver what the market needed up until now.

But with legally mandated safety syringe requirements and a fast-moving shift towards prefills and Patient Self Administration as a means of healthcare cost reduction, the market is changing rapidly, away from commoditised product, into a new paradigm of drug delivery devices.

Enter Unilife. Alan stressed the point that Unilife is no longer just a single product syringe company. In fact, Unilife is now an Advanced Drug Delivery Systems company with a rapidly expanding portfolio of products broadly based on the proprietory Unifill technology.

Moreover, even as a Drug Delivery Systems provider, Unilife is not just a component supplier, but a Systems Solutions Provider to global pharma.

No other company in the world has anything approaching our technology. Both Alan, and perhaps more importantly Ramin with his depth of industry expertise, stated that it would be years, if ever, that any other company would be able to develop anything like what we have. Alan actually stated that then sophistication of Unilife's existing and pipeline technology created a 100% barrier to entry for any would-be competitors.

So Cross Farm is not just about the facility, which is significant in itself, but everything it encompasses and represents - the people, the design expertise, the validated production systems, the patented technology, and most importantly, the proven reality that Unilife can deliver what it says it can deliver.

He stated several times that when the pharma companies come visit they are 'blown away' by what they see. Ramin also made the point that when dealing with their pharma clients, Unilife undergoes significant and extensive audits which run for weeks at a time, with the Big Pharma staff on site throughout. Every time, Unilife passes these audits with 100% a rating. Again, proven confidence to the pharmas that Unuilife can deliver all their requirements to the most stringent quality control standards.

Pharma Clients.

Both men stated the fact of Unilife dealing with the Top 20 pharma companies in the world. The requirement for confidentiality is an industry standard. I think it was Ramin who said that, at the conclusion of one recent discussion, the senior executive they were dealing with said, that "The fastest way for me to get fired and for you to never deal with our company again would be to identify who we are."

Such is the level of secrecy, competitiveness and paranoia surrounding big pharma.

That said, due to the stringent SEC reporting requirements, and the calibre of executives on our Compliance Committee, Alan categorically stated that when they release an announcement that they are negotiating with, or have signed an agreement with say, a Top 5 or Top 10 Pharma client, it is a given that they have done just that. All US listed companies can be subject to random audit of market releases by the SEC. They simply cannot, and would not make that release if it were not true. There is too much at stake to do otherwise.

The consequences to both Unilife and the executives involved of misleading the market would be catastrophic. In this respect, Alan mentioned Marc Firestone, our chief Legal Counsel and head of the Compliance Committee. Marc is still Chief Legal Counsel for Kraft Inc. Last year he earned US$4.7 million in that role. Would he endager his entire past, present and future by authorising a misleading or factually incorrect market release about Unilife?

So we are in great shape. We ARE dealing with the biggest and best pharma companies in the world. And they ARE lining up at our doors, seeking our help in meeting their needs. And the devices we are developing ARE in direct response to what these companies have asked Unilife to provide.

As Alan said, Unilife is not developing these products on some flight of fancy in the hope that they might be able to sell them. They are developing specific products in response to the specific needs of Big Pharma. Hence our emergence, not as a syringe company, or a component supplier, but as a Drug Delivery Systems Solutions Provider to global pharma. Tailor-made, customised devices, not commoditised off-the-shelf product.

Why customised? Because of the changing nature of the drugs themselves, and the emergence of biologics as a driving force in drug devlopment. Biologics are highly complex drugs containing anything fro 20-30 atoms and molecules, up to several hundred. There are over 1,000 biologics in the pharma pipeline. Of these, over 300 are injectable. All require customised delivery devices.

For me, the standout products were the Select, the EZMix, the Unilife AutoInjector and the Unilife AutoInfuser.

Select and EZMix are based on the Unifill. The Select allows multiple needle size selection for intra-muscular/sub-cutaneous injection. The simplicity and ease of selecting and attaching the needle is outstanding.

Don't care what anyone says, the EZMix really IS a breathtaking piece of design. Because of their complexity, many biologics are produced in powdered/crystallised form. First the drug is constituted in liquid form then freeze-dried into powder.

Alan went through the existing multiple-step process for injecting these drugs - take a vial of powdered drug, use a first syringe to extract the required amount of powdered drug. Take a second vial of diluent. Take a second syringe and extract the required amount of diluent. Take a third vial and inject both the diluent and powder into it. Shake it up to mix it. Take a third syringe, extract the mix and inject it into the patient.

Or, take an EZMix syringe containing both the powdered drug and diluent in seperate chambers. Depress the plunger, the diluent is injected into the powder chamber, shaken not stirred, and is instantly ready to inject.
Release the plunger to control retraction of the needle. Throw away. Not three syringes, just one. Attractive to Big Pharma? Let me think about that for a moment. Oh, that's right, EZMix was developed in direct response to a particular pharma's specific request.

Why powdered drug? For shelf life. In liquid form a biologic drug has a shelf life of about one week. In powderded form the drug has a shelf life of over two years.

Market potential? Alan said it would sell for $5-$7 dollars per unit. With 50 million doses per year of the drugs in question, and a 60-65% margin, the maths is compelling. Why the premium price? Because the drugs in question sell for several hundred to several thousand dollars per dose. And the drug companies need to differentiate their product.

The AutoInjector. Essentially a 1ml Unfill in a user-friendly sheath. Specifically designed for the rapidly growing self-injecting patient market. Alan showed a competitive product next to the AutoInjector. No comparison in terms of size and functionality. He made the point that the product on display was not the finished article, that the production-ready AutoInjector would be even slimmer. The beauty oF this product is the audible click that has now been incorporated into the Unifill.

When the plunger is fully depressed, there is both an audible and tactile 'click' which tells the home patient that the full measured dose has been delivered. A small window allows the patient to see that the needle is fully retracted. Throw away. For those who don't like needles, (and who does?), the patient NEVER even sees the needle.

Cost? From memory it was $5-$7 per unit. In terms of usage take-up, Alan posed the question, which product would a doctor prescribe? The existing products that don't have in-built auto-retraction and guaranteed dose delivery confirmation systems, or one that does?

Alan stated that by 2014, with 400 million Unifills in production, 20% would be AutoInjectors for the self-administration patient market. I'm not sure whether this was in addition to the 400 million or part thereof. Either way, compelling maths.

The Unilife AutoInfuser

Here's the story. Recent appointee to Unilife, Ian Hanson, ex-Medtronic global Drug Pump guru, "Mr Pump" as he was described, the world-leading expert in drug pumps bar none, relocates his wife, a practising doctor, and two children from LA to Central PA. Four weeks later, a major pharma with a pipeline drug approaching clinical trials had been in discussions to with two of the major syringe companies to develop a 5ml pump. Un-named, but guess who? Neither could come up with a solution to their existing 3ml devices. One of these outfits had the project for 18 months. Their eventual solution? Put two 3ml pumps on the patient! They came to Unilife. Within one week, under Ramin's guidance, the design team presented not one, but three, fully functioning prototype devices to the client. As Ramin said, when they saw them, they nearly fell off their chairs. Watch this space.

Why the AutoInfuser? Again, comes down to biologics. These drugs are so complex that they end up with the consistency of honey, making them extremely difficult to inject. Not only that, but dosage levels are high and it is not feasible to inject up to 10ml sub-cutaneously in one hit.

How does the AutoInfuser work? Peel off some sticky tape, attach to the body. Press a red button. A 4ml needle injects into the body. The pump then inserts a catheter into the body over the needle. The needle auto retracts. The pump commences delivering the required dose through the catheter. Upon completion, the cather retracts and a green light comes on telling the patient the dose procedure is complete. Remove device and throw away.

Cost? $50-$70 per unit, with a projected initial production of 2 million units per annum. Back to compelling maths.

So that's about it for now. Taken a while to get this done.

Lsst but not least, was the question of capital requirements going forward. Alan stated they have enough money through to end of 2012 when production will really start to ramp up. In the face of some fairly robust questioning, he discussed the possibility of up-front license fees for the various products in various Therapeutic Drug Classes, as well as the likelihood of several of these products being funded through to production in the same way Sanofi funded the Unifill.

Due to aforementioned stringent SEC requirenments, he could not, and cannot, say with any certainty when these may be delivered. But he repeated several times that over the next 3-12 months they expected various announcements about these developments to be forthcoming.

Both he and Ramin also talked about the growth of US funds on the UNIS register. By way of example, Alan talked about Fidelity, the largest fund manager in the world, with the pre-emminent Medical Device Fund. After visiting Unilife and conducting extensive due diligence on Unilife, Fidelity began buying on-market in March. Alan stated that they have several major funds including Fidelity who are pressing Unilife "to take their money" or words to that effect.

So there are multiple options. I personally would be surprised if we see another SPP. US-based insto placements yes, but SPP? Alan also stated that, not only as the largest shareholder, but for all shareholders, he was very mindful of further dilution and wouild take whatever was in the best interests of all shareholders to minimise this.

One last thing. Ramin spoke at length about his first task when he joined, which was to write a business plan. He explained what went into it - his many years of industry knowledge and expertise, his personal relationships with senior executives the world over, and how he brings these relationships with him to Unilife, his knowledge of pharma companies, how they work, their drug pipelines, the device industry generally, where it is now, where it's going, and as a PHD in the field, his extensive knowledge of molucular drugs etc. etc., and how he triangulated all that into the business plan.

He ended by saying that, in his opinion, Unilife was going to be "Colossal."

On that note, sorry it's taken so long, but IMO it was a compelling presentation. Much more in there, and will get to the rest of it later. Particularly about the ramp up to full production which will being in earnest in the next six months.....

....also about how our products extend patent life. How, once approved, a drug generally has ?nly about 12 years patent life left. But that Unilife's IP can extend that by a further 8 years to 20 years. Take a $250 million a year drug, conservative for many of these drugs, Alan's words, not mind, extendthat by another 8 years and youve handed the pharma an additional US$2 billion in revenue. How much are they going to pay up-front to secure that right?'....

The end....or is it just the beginning!

BTW, Sorry to miss you CREDIT. Had second thoughts about the AB jersey, but was in a black tee, and kinda hoped the red Duty Free bag might give it away.

Redpill, if you were within earshot of me telling who I did about the black tee I was wearing, why didn't you introduce yourself? Maybe next time. :)

Good luck everyone. We ain't going to need it. IMO.