Unigene Laboratories, Inc. (OTCBB: UGNE) has reported its financial results for the quarter and year ended December 31, 2009.
Revenue for the three months ended December 31, 2009 was $2,572,000, compared to $4,854,000 for the three months ended December 31, 2008, and $12,792,000 for the year ended December 31, 2009, compared to $19,229,000 for the year ended December 31, 2008. Revenue for all periods primarily consisted of Fortical sales and royalties, which were $10,932,000 for the year ended December 31, 2009, and $16,578,000 for the year ended December 31, 2008. Fortical royalties were $4,991,000 for the year ended December 31, 2009, compared to $6,520,000 for the year ended December 31, 2008. Fortical sales were $5,941,000 for the year ended December 31, 2009 compared to $10,058,000 for the year ended December 31, 2008. Fortical sales fluctuate each quarter based upon Upsher-Smith’s ordering schedule. Fortical royalties fluctuate each quarter based upon the timing, pricing and volume of Upsher-Smith’s shipments to its customers. Fortical sales and royalties have declined since the launch of competitive products in December 2008.
Following are recent highlights and developments:
Tarsa
* In October 2009, we licensed our Phase III oral calcitonin program to Tarsa, a new company formed by a syndicate of three venture capital funds specializing in the life sciences: MVM Life Science Partners, Quaker BioVentures and Novo A/S. Simultaneously, Tarsa announced the closing of a $24 million Series A financing from the investor syndicate. Tarsa obtained the worldwide (other than China) rights to market and sell the oral calcitonin product.
As part of the agreement, Unigene owns approximately 26% of Tarsa (9,215,000 shares) and is eligible to receive milestone and royalty payments. Tarsa will be solely responsible for all future costs related to the global oral calcitonin program. Tarsa paid Unigene approximately $8,993,000 in association with its oral calcitonin Phase III expenditures to that date.
Based on the analysis performed, we determined that our oral calcitonin program was an integrated set of activities and assets that met the definition of a “business” under applicable accounting guidance. We therefore calculated a net gain of $5,686,000 upon the signing of the Tarsa license based upon the receipt of $8,993,000 and the Tarsa common stock valued at $2,119,000, offset by our fourth quarter oral calcitonin expenses of $4,853,000 as well as the shares issued to Victory Park valued at $573,000.
Fortical
* Data from IMS indicates that as of December 2009, Fortical had a 43% share of U.S. nasal calcitonin prescriptions, down from the 48% August market share. We believe that the decrease in market share is attributable to the launches, beginning in December 2008, of three products which are generic to the innovator product, but not to Fortical. We do not yet know the long-term effect on Fortical sales and royalties of the launch of these competing products. However, certain providers have substituted these products for Fortical, causing Fortical sales and royalties to decrease. Despite the availability of these competing products, Fortical still remains the most frequently prescribed nasal calcitonin product in the U.S.
* In September 2009, we reported that the United States District Court for the Southern District of New York, confirmed the validity of Unigene’s patent on Fortical, and that Apotex had appealed that Order. In October 2009, the District Court vacated its Order subject to reinstatement and asked the parties to identify any claims that remain in the case. As a result, Apotex’s appeal was deactivated. The District Court has not ruled on whether any additional issues remain to be resolved, but a preliminary injunction remains in place precluding Apotex from infringing Unigene’s patent on Fortical.
Research & Development
* In December 2009, we announced that we selected a lead peptide compound, designated UGP281, from our obesity research program for development. In comparative animal studies at the same dose, UGP281 was at least 3-fold more effective in reducing food consumption than certain other peptide compounds that are currently in later-stage clinical development by third parties for accelerated weight loss. In addition, there were no overt signs of toxicity. The pronounced reductions in feeding behavior, as well as the weight of the animals after daily administration of this peptide, persisted over several weeks of dosing.
* In December 2009, we announced that an independent Data Monitoring Committee recommended that Novartis and its partner Nordic Bioscience proceed as planned with their ongoing oral calcitonin Phase III studies for osteoporosis and osteoarthritis. This recommendation was based on the committee’s recently completed “futility” analysis of the data obtained from all patients enrolled for at least twelve months in these studies. That analysis included an assessment of both safety and efficacy parameters. It was the committee’s opinion that there are no major or unexpected safety concerns and it unanimously recommended to proceed with the studies to evaluate the efficacy and safety profile of oral calcitonin as planned. Unigene is entitled to receive milestone and royalty payments upon the commercialization of Novartis’ oral calcitonin product.
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