TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH UNILIFE MEDICAL SOLUTIONS (ASX: UNI), CEO, ALAN SHORTALL
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me for the first time from the Pennsylvania headquarters of Unilife Medical Solutions (ASX: UNI), a manufacturer and supplier of innovative healthcare safety products for medical device and pharmaceutical industries, is CEO Alan Shortall.
Alan welcome to FNN. Can you start by introducing Unilife, how long have you been going? What are the major product lines? And are you profitable?
Alan Shortall: G’day Clive, thank you. Unilife (ASX: UNI), is an Australian ASX publicly listed company. We design, develop and manufacture innovative safety medical devices. In particular, we have a patent protected portfolio of retractable syringes, with major functional and safety feature advantages which we believe will cause them to be the product of choice in a market where demand is now being driven by legislation. We originally listed on the stock exchange in Australia in November 2002. At that stage we employed 4 people. We now currently employ in excess of 85 staff worldwide and have our global headquarters in central Pennsylvania, where I and the rest our executive team now reside. In terms of profitability, our results for the 08/09 financial year were $40 million in revenue and $12.8 million after tax profit.
Clive Tompkins: What is the global market for prefilled safety syringes?
Alan Shortall: There are about 2.3 billion prefilled syringes used every year. That market is growing in excess of 15% per annum, so it is a very attractive market where it’s got constant annual growth of double digits. There are more than 50 injectable drugs and vaccines that are currently available in prefilled syringe format. The combined sales of these drugs exceed $50 billion. The actual market for the prefilled syringes itself is $1.5 billion per annum and as I say that’s growing in excess of 15% per annum.
Most pharmaceutical companies are now seeking to purchase prefilled syringes that can comply with the ‘needle-stick’ prevention laws, such as those currently enforced in the U.S.A. The law in the U.S.A is that all healthcare facilities must provide safety syringes. So we are in the market where demand is now being driven by legislation. We expect Europe, Australia and other international markets will follow suit and move into mandatory use of safety syringes over the next couple of years.
Clive Tompkins: And what percentage of this market are you aiming to capture?
Alan Shortall: Ok well put it this way, sanofi-aventis is the world’s largest purchaser of prefilled syringes. Independent analysts have estimated that sanofi-aventis currently purchase over 40% of all prefilled syringes manufactured every year. We are in an exclusive agreement with sanofi-aventis, for they have the exclusive right for 5 years to negotiate to purchase our product from us. That gives you an indication of how well we are positioned as a company.
Our production plan for the Unilife ready-to-fill syringe, targets the annual production of in excess of 450 million units by the end of 2014, and over 890 million units by the end of 2016. This will give us approximately 20% of the then estimated global prefilled syringe market at that time. We consider this 20%, representing 890 million units per annum by the end of 2016, to be conservative. Particularly given that we have also retained the right, not only with sanofi-aventis in relation to supplying prefilled syringes to them, but also we have the right now to negotiate the sale of our ready to fill syringes to other pharmaceutical companies, provided they don’t compete with sanofi-aventis in the therapeutic drug classes that sanofi-aventis are in.
Clive Tompkins: What separates your technology from those of your competitors?
Alan Shortall: Well look, one of the key elements in relation to this is the differentiation of not only our products but also the company, we are market focused. We went into the market to find out what the market wanted and what we have found is that the current generation of safety or retractable syringes do not meet the requirements of healthcare workers in terms of either the functionality or the safety that’s required. So we’ve custom designed products that meet that specific safety and functional needs of this specific target market in each of the four target sectors that we’ve actually identified and have developed technology for. We have two common features in each of our safety syringe technologies; that is, automatic or passive retraction combined with controlled retraction. It is the combination of these two features which actually makes this technology the safest in the world. This means that the needle can be retracted directly from the patient, thereby practically eliminating the risk of a needle-stick injury. And the other thing is, in terms of our prefilled or ready-to-fill syringe, we designed this product to be compatible with the standard drug filling and packaging systems that pharmaceutical companies currently use. So that means that our device, even though it’s the only syringe and prefilled syringe in the world that has integrated safety, it will fit into the standard filling systems pharmaceutical companies currently use, so they do not have to go back and retrospectively refit their filling systems.
Now with our device, we actually will save because it is compliant with the standard size of a normal prefilled syringe. The only way pharmaceutical companies can currently comply with the law in the U.S.A, is by clipping the safety device onto the syringe, which makes it very bulky. So by using our prefilled syringe pharmaceutical companies will save approximately 70% in packaging, 70% in transportation and approximately 70% in storage; and most of these drugs have to be stored in cold rooms, so its not only a better safety solution but it’s a better financial and a better logistical solution as well for pharmaceutical companies.
Clive Tompkins: Turning to your most recent announcement, you’ve received commitments from sophisticated and professional investors in the US and Australia for $32.1 million worth of stock at $0.85 per share plus a $10 million share purchase plan. Where are the funds going?
Alan Shortall: This represents a total cash injection to our company of $42 million. Most of these funds will be used for capital equipment and to put the infrastructure in place to enable us to meet our projected manufacturing capacity for the supply of market demand. We are also now able to fast-track the commercialisation of other exciting products that are currently in the development pipeline. Some of these products have received initial strong interest from pharmaceutical companies. So in many ways this money is a bit like taking rocket fuel on that’s going to drive our expansion into being a dynamic global industry leader. It’s sufficient to fund our needs for the foreseeable future.
Clive Tompkins: You’re proposing to re-domicile to the US and list on NASDAQ. Why are you moving to the US?
Alan Shortall: We believe that this is really a global play. Not an Australian or a US play. And the fact is the US is the world’s largest and most mature market for medical devices. It’s also the world’s largest capital market with a strong awareness of the pharmaceutical and medical devices market. We believe that we will get full recognition in that market in the U.S.A. Our manufacturing facility along with our operational and infrastructure and also most of our staff, including myself, are already located in the U.S.A. So moving to NASDAQ is a natural progression that will allow us to fulfil our global potential.
Clive Tompkins: Alright, so how can shareholders expect to benefit from the NASDAQ listing?
Alan Shortall: Well, we have already received significant interest from major US institutions and sophisticated investors; in fact some of them took part in the recent capital raising. The Rodman & Renshaw conference that was held in New York during September just gone by, at which I presented, attracted more than 4000 specialist healthcare and pharmaceutical investors. The reception that we received at that conference alone made it clear that these investors clearly understand how well we are positioned to quickly become a global leader. Many of these investors have policies that restrict buying Australian listed companies, so I believe that they are looking forward to us listing on NASDAQ.
Clive Tompkins: Will you maintain your listing on ASX as well?
Alan Shortall: Yes, we are re-domiciling the company to the U.S.A and we’re doing a full listing on NASDAQ we’ll be a US company listed on NASDAQ at that time. But our shareholders in Australia will be able to trade these US shares on the ASX as CDI’s. So in many ways, they actually won’t know the difference, they can just trade on a day-to-day basis. But what the good thing is all our shareholders will have a choice, they can actually have CDI’s to trade in Australia or they can have US stock to trade on NASDAQ and they can actually convert from one to the other at anytime they want. So they can take advantage of market demand in Australia or in the U.S.A. But I believe our market growth; our market capital growth is going to be actually driven from the U.S.A. In the U.S.A they actually recognise and understand the opportunities that we have created.
Clive Tompkins: Last question, with the global threat of swine flu and so many injectable drugs and vaccines being with prefilled syringes there must be a lot of interest right now in your products. How are discussions going with sanofi-aventis and other pharmaceutical companies?
Alan Shortall: In terms of our relationship with sanofi-aventis, we are now in the ideal position where we can negotiate with other pharmaceutical companies to supply our product to them, provided they don’t compete with sanofi-aventis. We are very happy with the strong relationship that we have developed with sanofi-aventis who are also a global leader in vaccines as well. We expect that they will be a major customer for our products moving forward and as I said we are also in discussions with a number of other major pharmaceutical companies which are also leaders in their respective drug arenas. So those other pharmaceutical companies clearly recognise the unique opportunity our products offer to increase their level of competitive differentiation and to extend the lifecycles of their drugs and vaccines. Once we formalise the signing of the exclusivity with sanofi-aventis, which we expect to do early in the New Year, we expect then to be able to enter into agreements with a number of additional pharmaceutical companies who also recognise the benefits of our technology. Indeed I am so confident in the future of Unilife that I have just this week purchased another $500,000 worth of shares in the open market for myself.
Clive Tompkins: Alan Shortall, thanks for introducing Unilife.
Alan Shortall: You’re welcome. Thank you very much indeed, I appreciate it.
