the ambulance at the bottom of the patent clif

I guess we all know the parable about the cliff on the outskirts of the village where people would go to admire the view. While the view was magnificent, the cliff was a dangerous place to be and people kept falling off and injuring themselves. Debate raged about whether to park an ambulance at the bottom of the cliff to collect the injured and take them to hospital, or whether to put up a fence at the top of the cliff and prevent them falling off in the first place. Eventually, after trialing the ambulance concept, which didn't work, the villagers agreed to erect a fence and the problem was solved.

So while we wait for a variety of news, including Unitract 1 ml sales, I've been mulling over Alan Shortall's comments in the 3Q Earnings Call. To my way of thinking some interesting patterns are beginning to emerge which weren't so obvious to me before, but which will have a profound effect on Unilife's growth.

I have used quotation marks to indicate AS's own words.

1. "Currently, there are 80 drugs delivered in a pre-filled format."

2. "There are some 150 drugs in the R&D pipeline that are expected to be delivered in a pre-filled format."

3. "Over US$80 billion in blockbuster drug sales are coming off patent in the next five years. Some of these drugs individually generate over US$1 billion pa revenue."

4. "As these drugs fall off the patent cliff, they are coming under increasing pressure from generics and biosimilars."

5.Pharmaceutical companies are therefore "very keen, because of those patents running out, to find ways to extend the lifecycle of those drugs and defend their revenues."

5. Unilife is "accelerating our discussions with the major pharmaceutical companies for the Unifill. These discussions are focussed on two areas. Firstly, helping provide pharma companies with a unique brand differentiation in competitive areas. Secondly, offering the potential to extend the lifecycle of blockbuster drugs."

6. "By using our device,(Unifill), Pharma companies can develop a Unique Selling Proposition to help extend the lifecycle of their blockbuster drugs."

7. "Unifill can actually offer them the opportunity to do so, by them submitting a Supplementary New Drug Application to FDA and rebranding the drug as a new improved drug using the Unfill device. By doing this we can offer them the opportunity to extend the lifecycle of their drugs."

In the Q&A part of the call, Alan was asked "Are the discussions with big Pharma about the safety aspects of the needle, or as you indicated in your earlier remarks, about extending the shelf life of drugs falling off the patent clif?"

ANS: "It includes both. Initially it was the safety aspects that ATTRACTED THEM TO US (my itallics), because that safety provides them with a Unique Selling Proposition into which their sales people can actually help them increase sales. That's one element of it.

"So we have two opportunities. The first is pipeline drugs coming through that WILL BE SUPPLIED IN PRE-FILL FORMAT USING OUR DEVICE. (My itallics, his words.)

"The second one which has enormous potential to help protect billions of dollars of revenue for major pharma companies, is that by adding the safety features of the Unifill as a Unique Selling Proposition and by applying to the FDA for a Supplementary New Drug Application, and rebranding the drug, that gives them the potential of putting a picket fence around some of those drugs that are going to fall off the patent cliff."

Alan then goes on to say, "Pharma companies that want to give consideration to using our device to help extend the lifecycle of a blockbuster drug that may be coming off patent, WILL REQUIRE AN EXCLUSIVITY FROM US for that device in that particular therapeutic drug sub-sector in order to be able to have that Unique Selling Proposition over the generics."

I didn't really see it so clearly before, but it is now abundantly obvious where this is going, exactly what is being negotiated with Big pharma, at what stage the discussions are at, the position the pharma companies are in with regard to the looming patent cliff plus the competition they face from generics and biosimilars, and the limited options available to them to defend as much of their revenues as possible.

Enter Unilife Corporation.

Because the Unfill is the world's only fully integrated auto-disable safety syringe, Big Pharama really have no choice but to deal with Unilife if they want to distinguish themselves from the generic competition with an SNDA, rebranded drug, to extend the lifecycle of ththose drugs. Moreover, this strategy protects the revenue not only those drugs that are coming off patent, but also the future revenues from the pipeline drugs.

All of which begs the question, how much are they willing to pay to defend billions of dollars of present and future revenues?

In this respect, I believe the benchmark has been set by what Sanofi paid. Multiply that by the top ten pharma companies and you get some idea of the potential. And that's just exclusive License fees, and doesn't include ongoing unit sales.

Now here's the really interesting part, in case anyone thinks this is pie-in-the-sky, or that I've succumbed to my own ardent enthuisiasm for Unilife. The following three articles back up everything Alan Shortall is putting in place.

1. From ReportBuyer.com, a market research provider, a US$1,700 report titled, Injectable Drug Delivery, Industry Trends.

"As competition in the pharmaceutical market place grows, companies are increasingly looking towards the drug delivery industry to maximise revenues and combat generic competitors."

2. From Reuters, March this year, the forecast Top Ten Drugs in 2014, which reflects the growing commercial dominance of injectable biotech drugs, particularly for cancer and arthritis.

Avastin, cancer, Roche, US$8.9 billion
Humira, arthritis, Abbott, US$8.5 bllion
Enbrel, arthritis, Pfizer, US$8.0 billion
Crestor, cholesterol, AZ, US$7.7 billion
Remicade, arthritis, Merck, US$7.6 billion
Rituxan, cancer, Roche, US$7.4 billion
Lantus, diabetes, Sanofi, US$7.1 billion
Advair, asthma, GSK, US$6.8 billion
Herceptin, cancer, Roche, US$6.4 billion
Novolog, diabetes, NovoNordisk, US$5.7 bllion

Pharmalot.com noted the most interesting thing about this list was that it included only one pill. (Didn't say which.)

3. A report from Cambridge Consultants, Mass. in December 09, states that "In recent years pharma companies have changed the way they view patients, thinking of them more as health care consumers to be targetted directly. This means drug delivery devices are likely to include the qualities and features associated with consumer products...with much more emphasis being placed on the usability, look, feel and functionality of these consumer drug delivery products."

To my way of thinking this means the bulky, cumbersome, difficult to use and dipose of, clip-ons and needle shield 'safety' syringes are soon-to-be extinct dinosaurs, especially in the rapidly growing home care self-injecting market.

The Unitract range of Safety Syringes, plus the Unifill, Unifill Select and Tuberculin, are the world's only slim-line fully-functional auto-retract auto-disable safety syringes. Combine these patented features with almost global mandatory regulatory requirement for safety syringe practices to help prevent needlestick injury, and it seems to me Unilife is uniquely positioned (Unique Selling Proposition, mentioned three times by AS), as both the fence at the top of the patent cliff and the ambulance at the bottom.

Lastly, I picked up at the end of the conference call, in response to a question, that Alan said 1ml sales could be expected 3Q. Coming together nicely, I'd say, and not long now until the "somewhat unlimited potential of Unilife" starts to be realised.

A good weekend to all.