Unilife. Imperium. The Future

The extraordinary thing about market activity in the last 24 hours is that the 'market' - and I use the term cautiously - places no value whatsoever on the development of Imperium, or the fact that, to use David Hastings words, "the financing mechanisms we have put in place are very strategic and...really secure 2016 from a funding perspective."

In fact, the market WAS impressed with Imperium, at first, really impressed, then the funding mechanisms threw it out of kilter....somewhat

Bummer.

So, what to make of it.

I've read through all the reaction, opinions and thoughts. As usual, my own thoughts - I know, boring for some, but bear with me  - come down to a few key comments in Question Time.

CAPEX

Keith Markey was like a dog with a bone on the question of 'cash-burn'. Both David Hastings and Alan saw it differently, adamant that it was valuable, prudent, investment in the company, not merely wasted burn.

"We are working on a number of customer programs. We had expected that they would have happened before now. We are certainly building out for that expectation. It will become obvious in the not-too-distant future in relation to the contribution they - customer programs - can make. We are not always in control of the timing of these, but we have to maintain the investment, to maintain the relationship, with the confidence that the paperwork will follow through.

"The investment we have made is really prudent. It hasn't manifested itself in the share price yet...but it is inevitable that it will start to transition as we go forward."

Key Take-Out:

If there wasn't already a disconnect between the SP and what has been achieved in terms of inherent value across all the device platforms,  partnerships and development programs - notwithstanding the development of Imperium - there is now. For reasons beyond the company's control,  product to market has taken longer than first thought.  But what to do? Throw in the towel?  Or continue to drive the company forward, continue to invest in people, product and partnerships, continue to deliver on customer demands, continue to meet and exceed customer expectations, and eventually reap the reward.

It's not even a rock and hard place. Just good business. As needs must.

Regulatory Pathway

I'm not as well-informed as Indijo re the benefits or otherwise of the various ways to approval, including 510k. That said, the company made the strategic decision several years ago that regulatory matters would be based on the internal strategies of their many partners. This was reaffirmed today when Ian said:

"We are working with our partners on the regulatory approach that's going to fit their model best. There are advantages to doing different approaches. We are going to be taking the lead for the approach our partners want, to maximise the opportunity for the therapy from their point of view."

This applies to all the device platforms, and deals, not just Imperium.

Key Take-Out:

If the customer wins, Unilife wins.

It's not so much what Unilife wants, it's what the client wants, and what the client  wants, the client gets, especially when it comes to doing business with big pharma. Because the rewards will arguably be disproportionately commensurate to the commitment, Unilife is doing everything in its power to accommodate their clients in order to achieve the best result going forward. The only drawback is that it leaves us in the dark. So, very frustrating.

Other than that, from comments made today and at various other calls, it is obvious that a tremendous amount of work has already been done, and continues to be done, in this area. Neither Unilife or their partners are sitting on their hands doing nothing. It is no-one's  interest to do so. If you're not moving forward, you're sitting still. If you're sitting still, you're dead.

Imperium

"We're working with a number of partners. Not just insulin providers. There are other parties that are interested in building an insulin franchise. It comes down to the structure of the deal. There are many, many levers we can pull. Some devices we will manufacture. Some, the clients will. Some, Flextronics will. Some, the clients will pay for the manufacturing expenses entirely."

"As you look at the needs of Type 2 patients, there is a diverse set of needs in the way you organise these products. Our partners are viewing this slightly differently in the way they want to approach the market. Having a device of two different sizes, and the concentration of insulin in a different solution for different partners for different patients as well. But having a device of two different sizes to meet the different portions of the market is something that is customizable, and very likely."

"We have been working with a number of parties. Each of those parties know we are working with other parties. So it's quite delicate. We've been working for a number of months now. There's been quite an intensive amount of due diligence carried out. It's moving forward very well. We know what we have. We know how valuable it is going to be. We're going to take our time and do it, really, really, well."

Key Take-Out:

While Imperium is the first platform technology not to have been developed in response to specific  customer needs, it was developed exclusively by Unilife to address a significant unmet market opportunity.  An opportunity that was identified by Unilife. An opportunity they had the foresight, technical ability, and nimbleness of approach to capitalise on before any other device manufacturer could.

Result?

Overwhelming interest and acceptance from all the key players in the insulin market - both existing and  potential players - is confirmation enough that it was the right thing to do. Furthermore, that strategically it was an astute and prudent use of investment capital. Evidenced by the fact of multiple customer partnerships already going back several months involving extensive due diligence.

Negotiations for Imperium are at a more advanced stage than is at first apparent. Each of the partners Unilife  are negotiating with address different parts of the market with different therapies to meet different patient needs.

In a word: Differentiation.

Expect more than one deal for Imperium. With significant market share, even dominance, to Unilife.

Guidance:

David Hastings: "We take the question of guidance very seriously. Obviously, when a company does that for the first time, it has to be done very prudently in a measured way. So I'm not going to give guidance on guidance, but it is something the company takes very, very seriously. Obviously, it's something under consideration."

Key Take-Out:

Guidance is coming, but they're going to be damn sure that when they give it, they are absolutely certain they will achieve it, let alone exceed it. Given everything that has gone before, how long it has taken to get to this point, we can be confident they are not going to score an own goal on something as vitally important as their first market guidance.

Think about it. Someone of David Hastings' undoubted blue-chip reputation. Why would he give guidance if there was even the remotest possibility it wasn't achievable? He wouldn't. So far as guidance is concerned, he's the man. So when it comes, it will be worth the wait.

Conclusion:

By way of example, look at Insulet - Nasdaq PODD. They have one device for Type 1 diabetes. They boast revenue of some $300 million on which they still make an operating loss, despite margins of 51%. Market cap? $1.8 billion.

Unilife, arguably, has the most comprehensive suite of injectable drug delivery platform technologies of any device manufacturer in the world, addressing all the major disease states known to humanity.

Yes, it has taken an excruciating amount of time to reach the stage we are now at. But the inevitability of the transition between investment and share price is coming, and when it does, look no fruther than the likes of Insulet to see how dramatic it will be.