Stonegate Securities, Inc. Unigene Laboratories Inc. (WKN 875852, ISIN US9047531002, UUL, OTCBB: UGNE)
Price $1.80
52-Week Range $1.50 - $2.70
Market Capitalization 157,952,000
Enterprise Value 166,734,000
Primary Shares Outstanding 87,751,000
Float 83,190,000
Insider Ownership 5%
Institutional Ownership 15%
Daily Volume (3-Month Avg.) 94,000
Industry Biopharmaceuticals
Website http://www.unigene.com
Corporate Headquarters Fairfield, NJ
Company Description
Unigene is a biopharmaceutical company that focuses on the research, production and delivery of therapeutic peptides. Its initial focus is on salmon calcitonin (sCT) and other peptides for the treatment of chronic bone and joint disorders. Unigene received FDA approval for Fortical(R), a sCT-based product that addresses the osteoporosis market, in 2005. Upsher-Smith Laboratories licensed the rights to Fortical(R). In addition, Unigene has developed a patented manufacturing process for the efficient production of peptides and patented technologies for the oral and nasal delivery of peptides. The Company has also licensed the worldwide rights to its oral parathyroid (PTH) technology to GlaxoSmithKline (NYSE: GSK) and the worldwide rights for its calcitonin manufacturing technology to Novartis Pharma AG (NYSE: NVS). Unigene is headquartered in Fairfield, NJ, with manufacturing facilities in Boonton, NJ. The Company currently employs 100 people.
Summary
- Strong sales growth from Fortical(R) - Since its 2005 launch with
partner Upsher-Smith Laboratories, Fortical(R) has captured a near-dominant
(49%) share of the U.S. nasal sCT market that is estimated to be in the
- Safety concerns in the osteoporosis market - Bisphosphonate-based
therapies, the leaders in the
- Blockbuster potential - Unigene's partner, Novartis, has initiated a Phase III trial to evaluate oral calcitonin's disease-modifying properties against osteoarthritis, a disease that affects over 21 million Americans, for which there is no curative treatment. Novartis has also initiated a Phase III trial evaluating oral calcitonin against osteoporosis, which utilizes UGNE's manufacturing process. A positive outcome in either of these trials could catapult sCT to blockbuster status.
- UGNE's oral sCT program is progressing favorably - Apart from Novartis,
Unigene is developing its own version of oral sCT utilizing tablets in an
improved solid dosage form (patent applied for by the Company). The Company
just announced the initiation of a Phase I/II trial, with dosing to be
completed by the end of
- Strong positive momentum - For the quarter ended
- Valuation - With Fortical's imminent dominance in its market, an advancing pipeline targeting large markets, a dramatically improved financial position, and huge upside potential, we believe Unigene represents a compelling risk/reward opportunity.
Investment Summary
The commercialization of peptide-based therapeutics has been hindered by various technical challenges, and peptides have historically taken a backseat to small molecules as active pharmaceutical ingredients (APIs) for drug therapies. The advent of recombinant technology and recombinant protein production in therapeutics has facilitated the development of novel delivery systems and opened the door to new commercial opportunities for peptide-based therapies. According to Frost and Sullivan, peptides are poised to become 'the products of the future', and the market for peptide-based active pharmaceutical ingredients is expected to grow at nearly double the growth rate for APIs overall.
Unigene has spent the last 20 years focusing on research, manufacturing and delivery technologies for peptides used for medical purposes. That unwavering focus has uniquely positioned Unigene as the only biopharma company that manufactures peptides by recombinant techniques, while also having oral and nasal delivery systems to successfully administer the peptides.
Top-tier partnerships and a portfolio of patents validate UGNE's
technology platforms - Both of Unigene's technology platforms can be applied
to products addressing a large variety of diseases. The Company has been
awarded multiple patents to validate its technologies. Further validation for
Unigene's products and technologies comes from partnerships with some
top-tier names in the pharmaceutical industry. Partnerships are in place with
Upsher- Smith Laboratories, Novartis Pharma AG, and GlaxoSmithKline, and
collaborations are in place with world-renowned universities including
University of
Fortical(R), UGNE's first U.S. product, is in near-dominant position of
its market - Fortical(R), Unigene's nasal calcitonin product that was
launched in 2005 with partner Upsher-Smith, has exhibited substantial growth,
and it currently holds 49% of the nasal sCT market estimated to be in the
New indication could catapult calcitonin sales to blockbuster status - Novartis is conducting a Phase III trial investigating the effectiveness of oral calcitonin on osteoarthritis (OA), a painful disease of the joints. Conventional therapies address the reduction of pain and the suppression of inflammation; however, no disease modifying therapeutic is available for OA. In addition to a well-established body of evidence regarding calcitonin's effect on bone resorption, both in vivo and in vitro clinical studies suggest that calcitonin may have chondroprotective qualities (counter the acceleration of cartilage degradation), while at the same time, mitigating pain. With 21 million people suffering from this disease in the U.S. alone and with no curative treatment available, a positive outcome in this trial could open an enormous opportunity for Unigene.
Long-term positive industry outlook in the osteoporosis market - The
majority of Unigene's pipeline is focused on finding a more efficient
delivery of current products that address the osteoporosis market. The
osteoporosis market is poised for solid growth over the long-term.
Datamonitor has valued the market at
Safety concerns could dramatically increase sales of calcitonin-based products - Bisphosphonate therapies and selective estrogen receptor modulators (SERMS) are the current market leaders in the osteoporosis market; however, both therapies have been associated with serious side effects. Since 2003, medical journal articles have suggested that long-term use of bisphosphonates could lead to osteonecrosis of the jaw (ONJ). More recently, researchers have reported a possible link between bisphosphonates and increased brittleness in the bones leading to tiny fractures. Additionally, the New England Journal of Medicine has reported a possible link between SERMs and increased risk of heart attack and stroke. Also, the FDA is currently seeking additional data to allow for an in-depth evaluation of reports of atrial fibrillation in patients who take bisphosphonates. The evaluation should be completed in the latter half of 2008, at which time FDA will communicate the conclusions and any resulting recommendations to the public. At this point, most physicians have determined that the benefits of these therapies outweigh the side effects; however, if there is a documented increase in long-term complications associated with these therapies, we believe physicians will seek safer alternatives. Because calcitonin has shown an excellent safety profile over its 30+ years of use, we believe that sales of calcitonin-based products, such as Fortical(R), could dramatically increase.
New study by the AHRQ shifts the risk/reward argument in the favor of
lower risk - In
Unigene's broad pipeline of potential products addresses therapeutic
areas with large underserved patient populations - The Company continues to
expand its pipeline with innovative peptide-based potential therapies. In
addition to products for osteoporosis, Unigene's pipeline contains products
that address inflammation, diabetes, cancer and other diseases. The Company
has co-invented an exciting technology that could grow natural bone in
targeted areas of bone fractures and weakness. Unigene has recently licensed
two therapies from the University of
Patented recombinant DNA manufacturing technology - Unigene's efficient recombinant DNA technology that has been validated by Big Pharma leaders including Novartis and GlaxoSmithKline, is capable of producing active pharmaceutical ingredients (APIs) in quantities that could address global markets. Although the current focus is on the osteoporosis market, this platform can be applied to hundreds of APIs in multiple large markets, including obesity, osteoarthritis, and diabetes
Recent developments - Unigene recently announced plans to broaden its
activities with its joint venture partner, Shijiazhuang Pharmaceutical Group
(SPG), a China-based company controlled by Lenova (LNVGY.PK) and Goldman
Sachs(NYSE: GS). The intent is to upgrade SPG's technology capabilities and
dramatically broaden its pipeline. This will enable the joint venture to
capture a larger share of the enormous market potential for biotech products
in
Valuation
Unlike many of its biotech brethren, Unigene is not another developmental company with plenty of promise, but no sales. The Company not only has product sales, but based primarily on the strength of Fortical's sales, UGNE's most recent quarter (Q307) showed an operating profit. Going forward, we have modeled Fortical(R) sales to provide a slight net profit beginning in Q108, and continuing throughout the year.
We believe there are two very viable scenarios that could quickly elevate this company's success, and both are in the relatively short term. The first scenario occurs in the latter part of 2008 and involves the FDA's evaluation of reports of atrial fibrillation in bisphosphonate patients. After a series of serious side effects linked to long-term use of bisphosphonates, we believe this could be 'the final straw' in tipping the risk/reward scale toward patients and physicians seeking osteoporosis therapies with proven safety profiles. The second scenario, which would have a huge impact on the sCT market, is FDA approval of oral calcitonin as a therapy for osteoarthritis. If clinical data is positive, we believe oral-sCT could become the first disease altering therapeutic available for the 21 million osteoarthritis sufferers in the U.S. We estimate this market launch could be as early as 2010. And notably, this launch could be followed by the launch of a Novartis oral calcitonin product. Both of these potential products are in Phase III trials.
Our model projects the majority of revenue to come from Fortical(R) sales
over the next two years with 2007 revenue ending at slightly under
Importantly, Unigene restructured its loan obligations earlier this year
in
With Fortical gaining market share, an advancing pipeline targeting large markets, a near-term positive bottom line, and huge upside potential, we believe that Unigene represents a significant opportunity for investors.
Risks
UGNE currently has only one product on the market. Any changes in market demand, USL's ability to market the product, any regulatory changes, or any delays in production would have a significant negative impact on the Company.
UGNE has products in its pipeline in various stages of development; however, Unigene may never develop another product that receives regulatory approval.
Unigene has incurred significant operating losses since its inception.
The most recent quarter (
The pharmaceutical industry is extremely competitive in general, and with the aging population swelling the ranks of osteoporosis sufferers, competition in this market has heated up. Unigene competes with large companies with established products and other therapies that may emerge and displace calcitonin.
Indication: The complete report including tables and pictures can be downloaded free of charge as a pdf-file under http://www.presseportal.ch/de/pm/100014716/?langid=2
For further information please contact:
Stonegate Securities, Inc.
Laura S. Engel
Tel.: +1-214-987-4121
E-Mail: Laura@Stonegateinc.com
Warren P. Levy
President and CEO
Unigene Laboratories, Inc.
110 Little Falls Road
Fairfield, NJ 07004
Tel.: +1-973-882-0860
Fax: +1-973-227-6088
E-Mail: wlevy@unigene.com
Gerhard Zellweger
Zurich
Tel.: +41(0)43-497-34-25
Mobile: +41(0)79-408-57-01
E-Mail: garyzell@gmx.ch
SOURCE Unigene Laboratories Inc.
