the facility visit

Well it looks like the shorts are trying it on again with the latest in flimsy articles trying to squeeze every last share out of retail holders as they desperately try and cover as many as they can imo from this low low base, I reckon they know things are coming soon enough. The only suckers will be the retailers scared into selling and the retailers tricked into shorting at these prices!

Anyway:

Below is a rundown on the site visit I did with a broker/advisor mate of mine last week, the below is my own personal thoughts/wording on what was discussed and seen on the days we were in town. I would like to thank management/heads dept for spending the time with us and for answering the barrage of questions/queries I went armed with. We also met up with some of the top holders of Unilife and others within the industry and on Wall St, they also gave us great insight as to the mechanics of how things work over there.

We paid our own way for this trip and I am thankful to the team for their hospitality once we arrived. I will apologise to any newer holder for anything that has been glossed over as a lot of things here on HC have been discussed ad nauseam.

I must also thank Alan, Ramin and Stephen for clearing many schedules for us from when I first mentioned to Alan we were looking to come over, they are busy but wanted to make sure we were taken care of, only the week before we got there I think Ramin was in Europe on 2 different occasions with potential/existing customers, so time was a factor for us all to catch up.

When we first got to the facility we immediately noticed two things, a full car park and a massive crane down the far end of the building. We were met by Alan, Ramin and Stephen almost immediately and went into the boardroom for a chat. Alan then introduced us to Eugene, his brother, who is spearheading the expansion of the facility. Alan bought Eugene back to undertake this task as he has an intimate knowledge of the facility as he was there for the original build and fit out. Eugene took us through almost 30 prints of the expansion plans, which showed what they call the “Black Space” which is where the new cleanrooms are being built. There are 8 new cleanrooms in total with Finesse to take up 2 rooms and Nexus 1.5 rooms in the immediate future with the additional rooms ready for continued production ramp up/lines of Unifill products and a blend of the other platform devices, I guess we may find out more of the blend make up for customer requirements and future contracts they know are coming and as they are released.

We met up with a lot of the heads of department and were shown the highly impressive products. There are more MBA’s and Postgrads bouncing off the Unilife walls than there are in many small cities! For instance we have team members who were recently lead reviewers at the FDA for drug delivery devices, we also met another team member who wrote a paper on reconstitution of lyophilized drugs that I believe is still being used at BD. Also when we were walking around we were introduced to the Unifill Production Manager (French guy) who used to work for Sanofi and was working at Sanofi when they first approached and started dealing with Unilife, he worked on that project for Sanofi but has since relocated to the US to work with Unilife on the same product, just from a different angle now.

The people are as impressive as one would hope, especially when they are dealing with our existing and potential pharma customer’s needs regularly. Biodel were at the premises on the same day conducting a routine audit, although the guys made time to come and see us from that department, also Sanofi were there 10 days beforehand as well.

I wont go through the products one by one as most know what we have on offer and most probably have seen them at the shareholder briefings and or online, but there were a couple of interesting points raised during our discussions:

1. Lisa Auto-Injector, human factor studies were done on the Lisa and it received great feedback from the American Diabetes Association who said that the Lisa was a non-educational product, meaning that it is so easy to use that patients wouldn’t need to be educated on the how to of the product – great user interface. This product will help our customers enter the market a lot quicker than reformulating the drug to liquid format. The Rita was impressive also and has been the topic of discussion in Europe not 2 weeks prior to our visit and a meeting was planned for the US a week after we left.

2. Wearables, there have been approximately 2000 consumers use the wearable in human factor studies and the feedback is great, the product was simply placed in front of them and they were told to use them, nobody had any problems at all due to the 3 easy and simple steps. This was good to hear especially from a user interface perspective and should be rather favorable with regulatory bodies going forward. We have 33 engineers dedicated to the wearables alone, these are supplied to the patient prefilled and pre-assembled, nothing else like it out there no matter what anyone else may say.

3. Look out for the Ocu-Mix also. Alan had mentioned a conference coming in September but I see this has also been mentioned in a recent conference piece stating “Ocu-Mix device allows for mixing/reconstitution and delivery of lyophilized drugs. Unilife has the broadest portfolio of devices for ocular delivery”. September seems interesting to me!

4. I know there have been a few trying to work out how the wearables will work with the pharma customer and fill/finish. The WI’s are sullied in 2 halves (the outer-shells), along with a nesting tub with the primary drug containers (cartridges). The nesting tub with the primary containers (cartridges) go through the standard fill-finish line and the containers are filled. A robot then takes the filled container, clips it into one half of the outer casing and the two halves are then clipped together. No terminal sterilization is required, the WI is packaged ready for shipping from there. Hope that helps some understand the ease of this product compared to the “others” out there, I think the others mentioned on this board also talk with Unilife.

There’s a heap going on with all products and the company is in continual talks with many/most major pharma, I think when we look at the amount of differing products and think of the fact that they mostly came from customer demand/discussion for them, then we can get a clearer picture as to what the future can hold for Unilife, the demand/need is certainly there.

THE FACILITY:
In the morning we were taken up the far end of the building to see the HVAC units being installed on the roof, these units are part of the expansion and will meet all the air requirements for the new cleanrooms/facility. We then walked through the facility after lunch and saw multiple areas where development & prototyping was taking place and manual work was being done, they have been and continue to upgrade the machinery in this area also. I think we walked through 5 different areas with staff all doing their own specific tasks, probably 30-40+ people in this area. This manual process is where it all begins and the development products and future products come to fruition for the pharma customers, everything was being spec’d to the absolute and there would have been at least 8-10 people with their heads down going over every millimeter of the parts going through and screen capturing every move. We then looked at the WFI systems (water for injection) and we’re told of the upgrades being done for the expansion and new cleanroom requirements.

There was an area blocked off due to work going on in the facility and they had air monitoring near the existing lines/cleanroom corridors running, to make sure of the air quality every few minutes due to the work going on nearby. This work was for a semi-automated wearables line, we saw a lot of work going on in there and this line will produce the quantities (up to 1m I believe) needed to meet the pharma demands for testing, user studies and clinical trials for the next 12 – 24 months. They are in constant contact with manufacturing partners for the scalability and expansion/modular needs as demand increases, and continues to.

We were also taken to see a semi-automated line that can produce around 1m units, this is currently producing the Finesse and is being used to fine tune the process for the fully automated line that is on order. In saying that though we were taken to see the 60m unit line that also had the Finesse coming off the line as well. I believe there will be 3 shifts running on the 60m line as of next quarter, this will mainly be for Hikma.

Then there was the black-space for the new cleanrooms which was full of large boxes/equipment, it is all planned out and is a very large area to see firsthand, these are 7&8 classifications for those who kept asking. From memory we were told that by around January everything would be finished and new lines installed/validated. The planned build was in a shoehorn approach from existing cleanrooms to maximise space, the semi-auto WI line is going in now and a lot of the peripheral work for the new cleanrooms is underway. We have already been told of the new lines being ordered and underway and this was reiterated to us so all is well planned and thought of for short/medium & longer term needs by our customers.

FURTHER DISCUSSIONS:
I’m just going to list a few points that were of interest to me upon further discussions that were had with the guys. I’m trying not to replicate anything that was said in the Earnings Call but obviously a few things will cross over:

• When Ramin first went to Unilife there were 150 staff, of those 150 there’s only around 10 of the original staff with the company now, yet they have over 190 working for the company at present. The company was restructured to not be solely reliant on just one product and or customer. Alan had given Ramin the freedom to expand the portfolio and identify a strategic future for the company, not just for the immediate future but for long term survival and sustainability, the 10-15 year contracts suggest this will all come to fruition imo. When Ramin was at his previous employment they had spent approximately $100m on wearables over a 10 year period but were never given enough support/expertise to actually make it work, Alan gave Ramin the go-ahead to concentrate company resources including the right people (hence 33 engineers for WI’s) and now it looks as though this will pay off in spades over the years to come, the additional contracts/deals to come might help spell that out to us holders. The lineup of additional products I think will help/has helped with the long term viability of a company that has a lot of growth ahead of it and is not going to be tied down to just one product.
He also told us of a certain case on how things can get tied up in the larger companies when reacting to customer needs, in his previous employ there was a request to change a plunger colour so customers could identify differing drugs and this took years for the board to sign off on.

• With regards to Sanofi and the invent of the Finesse over what we had first signed up for regarding the Unifill itself, I believe this came about once the generic competition started to get approved and hit the market, not to mention a big price rise in the purchasing of Herapin out of China by near on 500%. A cheaper alternative for the Unifill syringe was needed to stay competitive, hence Finesse. This would be just one case of why things can be delayed in this sector/industry and how the game can change. But Unilife rose to the challenge and developed what it was the customer found themselves needing.

• When talking of contracts and whether any have been lost, it was said that all are still active, nothing has been lost. Ramin had been given a hard date for one coming up but they didn’t want to release this to market due to previous internal delays (pharma) having set other contracts back in the past. We were re-assured that none to their knowledge have been lost and that the work with the respective pharma’s continues, I think a few of those are included in the 10 programs running that were mentioned in the call. It is also conceivable that while working with the Unilife team that the pharma are wishing to add in more from their pipeline from the current deal/s being formalised and that this could help add time to the formal contracts being completed also.

I personally feel comfortable with the fact that some of these previously flagged contracts/deals could come at any time and that a lot of what is happening is pretty much out of the control of the company but they are still very much in play and are in continual contact with regards to development, should be an interesting 6/7 months to come for holders.

• The generic that was announced in 2012 and re-iterated in previous EC’s is still in play and stability studies are currently being conducted. It is expected/hoped that regulatory approval is gained in the second half of this year for the auto-immune indication in Europe.

• Funding, obviously we have the Orbimed funding for $60m, some here were worried if this is enough but I believe and it was confirmed in recent EC that the company has 3 avenues for this expansion and beyond. The current loan, upfront/milestone payments & equipment finance that has been flagged in the past and is available if needed only.

So that’s it folks, I hope it gives you a small window at least into what is going on and that things are moving along.

I will post a 2nd part to this in the coming days with regards to chats had with insto holders and people in the industry on Wall St/New York.