Sounding bankruptcy alarm, Unilife lays off 51
Unilife Corp. laid off 51 employees on Tuesday and warned it may have to shut down entirely if it is unable to obtain new financing soon.
Unilife develops, manufactures and supplies wearable drug-delivery systems, but has been struggling for more than a year to gain solid financial footing.
The latest crunch appears to be a dwindling stockpile of cash.
The company, based in Conewago Township, York County, said negative cash flow and recurring losses put it at risk of not having enough cash to continue operations past April 7, it disclosed in a filing yesterday with the U.S. Securities and Exchange Commission.
Efforts to reach the company this morning were not immediately successful.
Unilife said in the filing that it is working to bring in new financing but had not yet secured any commitments. The company is now exploring an option known as bridge financing. Under that scenario, it said, it would enter Chapter 11 bankruptcy protection, which allows a business to shed debts and reorganize operations.
The new money could come from an entity called ROS Acquisition Offshore LP, an affiliate of OrbiMed Advisors, an investment group that has lent Unilife at least $70 million since 2014, according to earlier CPBJ stories. ROS would extend what is known as debtor-in-possession financing, a common tool used in bankruptcy reorganizations.
If Unilife cannot obtain financing, the company said, it would have to file for Chapter 7 bankruptcy and permanently shutter its operations in York County and King of Prussia.
The company said it disclosed the potential shutdown in a Worker Adjustment and Retraining Notification, or WARN, Act notice sent to all employees and to state and local governments.
Before yesterday's layoffs of 51 people, the company had about 140 employees, including about 85 in York County. The SEC filing said yesterday's layoffs took place in both York and King of Prussia.
As of March 31, the company said, it had an unaudited cash balance of roughly $6.3 million, including $2.4 million in restricted cash. Under its debt agreements, the company must have a minimum cash and restricted cash balance of $5.1 million. Failure to maintain the minimum would put the company in default, potentially triggering higher interest rates or a demand for immediate repayment, Unilife said in its SEC filing.
"If the lenders were to make such a demand for repayment, we would be unable to pay the obligations as we do not have existing facilities or sufficient cash on hand to satisfy these obligations," the company wrote. "Under the circumstances, we also would be unable to pay our other obligations as they come due, which could prompt our creditors to pursue other remedies."
The company added that on March 31, a key customer suspended a program involving Unilife's wearable injector products for reasons unrelated to those products.
"Given the relative importance of such program, such delay may negatively impact the company's ability to obtain financing or the amount of financing the company may be able to obtain," the SEC filing said.
Late last year, the company said it was trying to sell its York County facility.
In its most recent quarterly earnings report, Unilife said it had a net loss of nearly $18 million for the three months ending on Sept. 30, 2016, down from a loss of $25.9 million for the same period in 2015.