unilife's products shows a weak business case

Dec 13 2013,

An Analysis Of Unilife's Products Shows A Weak Business Case

From, seekingalpha.com

Disclosure: I am short UNIS. ... :)

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Unilife (UNIS), a novel drug delivery device developer, has gone on a big run in the last month. Given the high short interest in the stock (last count was 20% of the float), many investors don't think this rise is merited. The company has never been able to make a profit in its 11 years in business. Unilife management has insisted that it has finally turned the corner, and many investors believe Unilife's story. I am not one of those investors.

After interviewing many industry insiders - doctors, scientists, medical directors and drug delivery device experts, as well as Unilife management I have discovered that Unilife's products as a whole have little practical value.

I believe most of the company's upside is already priced into Unilife's share price. The company needs to succeed with either Sanofi or Hikma. However, given Unilife's track record with announced supply agreements, there is a good chance that both deals will fall through.

The company's deals with the other pharma companies have little revenue or profit potential, since they are targeting small, niche markets. Even if those deals work out, if Unilife's deals with Sanofi (SNY) and Hikma (OTCPK:HKMPY) don't both turn into commercial supply agreements, I place the value of the stock well under $1 per share. Given these risks, I believe the value of UNIS today is only about $1.25-$150, or about a $150 million market cap.

Unilife Is A Lot Of Glitz With Little Substance

Unilife is very big on self-promotion, as can be seen in its latest annual shareholders meeting. In investor calls and trade shows, it makes an effort to show off its products: "Look, we've got a retractable syringe! Look, we've got a dual chamber solution! Look, we have an auto-injector! Look, we have new ocular delivery devices!" Yet, they haven't been able to sell anything. Unilife also likes to name drop: "Look! We made a deal with Sanofi! Look, we got Hikma! Look, we're partnering with Novartis!" (NVS) Yet, it is unlikely that a major commercial deal will be formed.

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http://seekingalpha.com/article/1895521-an-analysis-of-unilifes-products-shows-a-weak-business-case?source=email_rt_article_readmore