Unilife (NSDQ:UNIS) CEO Alan Shortall didn’t mince words about the offense he took to a pair of Forbes articles published in recent days, 1 of which raised some red flags about the company’s business practices and another that highlights a whistleblower lawsuit accusing the company’s leadership of misleading investors. The articles and accusations all but obscured the company’s recently released 4th-quarter earnings report and Unilife’s new exclusive supply agreement with Sanofi (NYSE:SNY).
The bad press prompted a formal response from the company and the articles came up during Unilife’s latest shareholder call, during which Shortall called the article "a malicious piece of journalism from a reporter with little life experience due to his youth or business experience."
"I perceive both articles as a vindictive attack on me personally as well as the company and all of its followers and supporters," Shortall said during the company’s quarterly conference call with investors and analysts, many of which have a favorable outlook on Unilife’s prospects.
Wall Street’s outlook, the article suggests, is marred by Shortall’s silver tongue.
"Five of the 6 analysts following the firm recommend the stock," the article notes. "And while the stock is down to $3.45, a 60% plunge since Shortall listed it on Nasdaq in February 2010, Unilife has a market capitalization of $329 million, 120 times sales. With cow-eyed optimism the average Wall Street forecaster predicts Unilife’s first profits in 2015–13 years after its birth, an eternity even for a biomedical startup."
"I’m amazed by the arrogance of this young reporter," Shortall said during yesterday’s conference call. "The articles as written are a slap in the face to you and some of Wall Street’s top analysts … and some of the world’s savviest portfolio managers."
The 1st Forbes article, published online September 4, characterizes Unilife as a company built more on promises than results, and paints Shortall as little more than a savvy salesman. Shortall has promised to deliver a dozen new contracts this year, a vow that Forbes staff reporter Abram Brown says is more hype than meaningful projection.
"Unilife is a parable of broken promises, Keystone Kop-like execution, self-enrichment by top executives – and the triumph of story over substance," according to the article, which is titled ‘How Is A $329M Syringe Company Still Unprofitable After 11 Years?’
Shortall in turn depicted the article and another that soon followed as misleading, inaccurate and rushed to publication, "riddled with typos and grammatical errors." The 2nd article, dated September 9 and focused on a former employee’s accusations in a lawsuit against Unilife, came just as the company announced its latest multi-year supply deal with drug-maker Sanofi, which Forbes characterized as "a development-stage drugmaker that’s never earned a nickel."
In the latest piece, titled ‘Unilife: Former Executive’s New Lawsuit Alleges Investor Fraud, SEC Violations,’ Brown highlights complaints brought by a Talbot Smith, the company’s former vice president of integrated supply chain, which the company terminated "for cause" in August 2012, less than a year after he joined. Forbes has, since initial publication, updated the article after Unilife took issue with the characterization of the complaints, which Shortall said were presented as fact rather than accusation, and the company send the news outlet documents that purportedly illustrate the "baseless" nature of the lawsuit.
For one thing, Smith allegedly signed quarterly certifications that he was unaware of any fraudulent or misleading activity going on at Unilife, despite making claims now that the company was doing just that. Forbes’ coverage of the story prompted an official response from Unilife, which was posted alongside its SEC documents.
"Although it is Unilife’s policy not to comment on pending litigation, the publication of your article makes it necessary for us to offer some response," the company said. "It is important to note that last fall Mr. Smith offered to settle his claims in exchange for an amount equal to six months salary. However, Unilife felt Mr. Smith’s allegations were an attempt to extort money from the company. His claims were so malicious and false that Unilife felt it needed to fight the allegations rather than settle because Unilife did not want to be accused of trying to cover up any damaging allegations by paying off Mr. Smith."
UNIS shares have been a bit of a roller-coaster in recent days, trending very differently on the Australian exchange, where shares were down 4.3% to 56¢ apiece as of market’s close last night, compared with the Nasdaq exchange, where shares were up 6.5% to $3.30 as of about 1:40 p.m. EST yesterday. The stock has spiked and slipped several times over the past couple of weeks as investors reacted to news of the company’s widening quarterly losses and the new Sanofi contract, as well as the Forbes articles.
The York, Pa.-based device maker missed Wall Street’s adjusted earnings estimates by 2¢ amid sinking earnings and widening losses during its 4th quarter. Q4 sales were $700,000, more than 40% less than the $1.2 million in revenue reported during the same period last year. Unilife’s losses amounted to $22 million during the 3 months ended June 30, 2013, 48% deeper in the red than during Q4 2012, when the company’s losses amounted to $14.9 million. Adjusted to exclude 1-time losses Unilife posted per-share losses of 11¢, where analysts had anticipated 9¢.
Unilife this week also announced that it signed a new long-term contract to supply its Unifill Finesse anti-thrombotic-filled syringes exclusively to Sanofi, a deal worth a minimum of $5 million and a maximum of $15 million in performance payments. Unilife expects to receive the 1st $5 million milestone payment this year, according to a company statement. The companies can extend the contract until 2024 as long as, following a 4-year ramp-up period, Sanofi purchases at least 150 million units of the Unilife syringes per year. Sanofi’s exclusivity includes only Unifill Finesse syringes prefilled with anti-thrombotic drugs, according to an SEC filing.
"The signing of this supply contract reaffirms the business model we have worked so hard in pursuing," Unilife CEO Alan Shortall said in prepared remarks. "The long-term contract provides the customer with continuity of supply. The provision of exclusivity within a drug class also provides the customer with an opportunity to leverage our device’s competitive advantages to drive user preference and differentiate their drug brands against competitors."
Unilife and Sanofi have a rich history together, including a 2009 "industrialization agreement" and others exclusivity agreement dating back to 2008 and 2009. The new deal supersedes all previous arrangements, Unilife said.
"The major supply contract with Sanofi that we announced this week for our flagship platform of Unifill syringes will establish Unilife as one of the leading suppliers of prefilled syringes in the industry," Shortall said in a press release.
By the time Forbes’ initial Unilife story went to press the company was facing the tail-end of its contract with Sanofi, which the article called "the one big contract [Unilife] ever scored." Reporter Brown further warned that the new Sanofi contract "may not be the barnburner many investors expected," as the 4-year ramp-up period suggests that Unilife won’t begin to see revenue from the contract until 2017.
During yesterdays’ conference call, Shortall vowed to quell any fears about the company’s prospects or leadership, saying that the timing of the 2nd Forbes article in particular suggests that the reports were designed to take down the company.
"The board of directors and I feel that this was a calculated attack on Unilife, and we are investigating this matter and the motivations and factors behind it," Shortall told analysts. "If the Forbes article raised even a shred of a doubt about Unilife, its operations or mine or [COO Ramin Mojdeh’s] business ethics, we are more than happy to host you and any other analysts or any of our investors to Pennsylvania at our facilities where we’ll answer any questions."