A quick look at the numbers of their most recent fourth quarter and full-year 2010 financial summary and an investor may think that Unigene Laboratories, Inc. (OTCBB: UGNE) is sliding down a slippery slope that they may not be able to climb back up but a closer look at the biotechnology company may give investors a different impression, one that may lead them to believe the company has the potential to deliver significant returns.
It’s important to remember that it has been less than a year since UGNE underwent their shakeup, appointing Ashleigh Palmer as their CEO and subsequently hiring a number of new executive officers and making changes to the Board of Directors.; and it has been six months since UGNE announced their strategic realignment of their business into two strategic business units, as part of this realignment they also announced their intentions to monetized, out-licensed or terminate the programs that no longer fit their core focus.
So essentially UGNE is a trimmed own and refocused biotechnology company that sees substantial opportunities for their “pipeline of proprietary peptide development programs” that concentrate on metabolic disease and inflammation as well as opportunities in which they can apply their “platform of peptide drug delivery and manufacturing assets, expertise and capabilities to partners’ proprietary development programs.”
This is a welcomed shift for those shareholders who have seen overall revenue for the company slip from $19.2 million in 2008 down to $11.3 million by the close of their 2010 fiscal year ending Dec. 31, 2010. There is a lot going on in between those figures and the nearly $8 million swing south may just be the end of their tumultuous spiral as brighter days appear to be on the horizon.
That seems to be the belief of many investors as shares pushed to a new 52-week high of 1.20 on Friday, one day after the company announced that “the statistically significant top-line results released by its licensee, Tarsa Therapeutics, validate its proprietary oral peptide drug delivery technology.” Making this so significant is the fact that the positive results are coming from the ORACAL Phase III oral calcitonin trial and because it achieved its primary endpoint Tarsa will move forward with their plans for a New Drug Application (NDA) submission to the Food and Drug Administration (FDA) targeted before the end of 2011. Adding to the positive news was that the study design and endpoints were agreed with the FDA through a formalized Special Protocol Assessment (SPA) process, meaning this should be helpful along the FDA approval process.
Palmer called the findings a game-changer for UGNE as it not only validated the company’s “propriety oral peptide delivery technology and state-of-the-art recombinant manufacturing capabilities, but highlights our overall competence in the peptide sector.” Not to mention the fact that while calcitonin is currently available as a treatment of postmenopausal osteoporosis it is only available in intranasal and injectable forms, meaning the oral peptide drug delivery technology of UGNE would be the only oral form on the market.
UGNE owns a 26% stake in Tarsa in and addition to the ORACAL trial Tarsa has initiated a Phase II osteoporosis prevention study with oral calcitonin. The trial will assess the efficacy of Tarsa’s oral calcitonin in the prevention of bone loss, as well as its safety and tolerability.
Under their own development UGNE is still pushing forward with their lead proprietary anorexigenic peptide, UGP281, which is intended to diminish or control appetite, potentially offering morbidly obese patients with a therapeutic treatment. UGNE has yet to file an Investigational New Drug (IND) application with the FDA but plans to in the first half of 2012, with plans to initiate Phase I clinical studies at the same time.
Anybody that has ever followed the FDA approval process for weight-loss drugs knows that it is an ugly road that almost always ends in disappointment so UGP 281 may not be the golden goose for shareholders but you have to admire UGNE’s willingness to explore the opportunity to “license a chemically and pharmacologically distinct sister analog to a veterinary partner for companion animal obesity to subsidize a portion of the human proof-of-concept development costs of UGP281.” Shareholders would rather see UGNE subsidize the costs of human proof-of-concept development costs through this avenue rather than through dilution.
What could actually define UGNE’s success for the near future is actually tied to their worldwide license agreement with GlaxoSmithKline to develop and commercialize an oral formulation of a recombinantly produced parathyroid hormone (PTH) analog for the treatment of osteoporosis in postmenopausal women. UGNE is responsible for the manufacture of the PTH as well as for conducting the Phase II study, for which they received a $4 million upfront payment. Upon completion of the Phase II patient enrollment UGNE will receive an additional $4 million and based on FDA approval and commercialization milestones they could add another $142 million. They can also receive tiered double-digit royalties in the low-to-mid teens on global sales.
Earlier this month UGNE announced they had begun dosing of the first subject in that study and while the patient enrollment for this study is ongoing they are expected to be completed in the first half of 2011 and UGNE anticipates reporting top-line results before year end. Success in this arena could be huge for UGNE as it is noted by the International Osteoporosis Foundation that in women over 45, osteoporosis accounts for more days spent in hospital than many other diseases, including diabetes, heart attack and breast cancer.
While the goal of UGNE is to raise revenue through product sales they have been developing more plans to generate a substantial amount of revenue through licensing and development fees, essentially money generated in development work and feasibility studies they perform for various pharmaceutical and biotechnology companies. As Palmer stated in regards to the future of UGNE “The demand for peptides is escalating and therefore we are committed to exploiting our proprietary Peptelligence™ core competence and intellectual property portfolio both internally and via industry leading strategic partnerships. Looking forward, our business model allows us to advance numerous opportunities in parallel. These multiple shots on goal, coupled with the solid execution of our strategy, promise to make 2011 a transformational year for the new Unigene.”
Unquestionably UGNE has had their problems and in many ways those problems still exist, they need to generate revenue and reverse the find a solution to the net loss they suffered in 2010, a 108% spike from 2009 to $27,868,000 but they seem to have gained some investor confidence with their new direction and with shares sitting around the 1.12 – 1.15 range they are trading above their 50-day moving average of 0.86 and their 200-day moving average of 0.70. If they can complete enrollment in the GSK trial and report favorable results by the end of the year their shares could easily be climbing well beyond their current level.