Unilife could be at crossroads

As the biotech company tries to right itself, a former CEO and former board chairman are under investigation

Michael Sadowski//May 13, 2016

Unilife could be at crossroads

As the biotech company tries to right itself, a former CEO and former board chairman are under investigation

Michael Sadowski//May 13, 2016

You could see Unilife as cleaning up problems left by former leaders and embarking on what could be a profitable future in the lucrative biotechnology market.

But there is also the view of a company continuing to spin its wheels after the resignation of its CEO in March and the Monday announcement of an internal investigation for possible violations by a former CEO and a former chairman of the company’s board of directors.

Insiders can’t get a handle on which way to lean right now.

“I don’t know,” said Keith A. Markey, an analyst for Griffin Securities Inc. in New York City, on Monday as he left a special meeting of company shareholders at the Crowne Plaza Hotel in King of Prussia near Unilife’s second corporate headquarters. “I have no idea yet. Because I don’t have a fundamental knowledge of (the situation) yet.”

Markey, who covers Unilife, said it is encouraging to see the company is hiring for jobs in engineering and production, and that it hired an in-house investor relations representative earlier this year.

At the same time, the stock is trading at an all-time low — it closed Monday at a tick above 36 cents, its lowest-ever price after dropping more than 29 percent from its Friday close — and is facing a possible delisting from the NASDAQ Global Market on May 31.

Then came Monday’s company announcement of an earnings call postponement because the company’s current management team discovered “violations of Company policies and procedures and possible violations of law and regulation” by the company’s former CEO and a former chairman of the company’s board of directors who resigned in 2015. The company did not name either person in the news release.

Unilife has only one former CEO — Alan Shortall, the company’s founder, who resigned his position in March but stayed on under a consulting arrangement.

There is only one board member who resigned in 2015 who was also a chairman — Jim Bosnjak. He retired from the board in August citing health reasons. He was the chairman of the board from 2006 to 2013.

Neither could be located for comment.

Unilife spokesman Jeremy Feffer declined to comment beyond what was in the news release. “This is an internal matter,” he said.

Feffer also declined to comment on whether the company has reported any potential violations to federal or state authorities.

A Securities and Exchange Commission spokesman declined to comment.

The company, according to the release, is investigating the possible violations and their potential impact on financial reporting, internal controls over financial reporting related to previous financial statements, current financial information, and management certifications. The current management team discovered the possible infractions, but an early-stage investigation has not uncovered any financial damage to the company.

Questioned while walking into Monday’s special shareholder meeting, Unilife interim CEO John Ryan said he could not comment on the investigation, and would not comment on the future of the company.

“We’re following company policy and will not comment more than what we put out this morning,” he said, referring to the company’s news release.

Unilife has been a lightning rod of attention — both good and bad — since last summer when it announced amid a string of quarterly losses that it needed to find a partner to stay afloat. It found that partner in Amgen, a California-based biotechnology company, which bought licensing rights for some of Unilife’s injectable drug-delivery systems.

The two sides finalized a deal in February — a few short months after Shortall loaned the company $600,000 to bolster its cash reserves and after executives took pay cuts for the last two-plus months of the year.

Amgen provided the cash infusion the company needed, a $50 million jolt, with another $25 million possible by January 2018 on Amgen’s option to buy two rounds of secured convertible notes.

The investigation comes as Unilife is staring at a potential delisting from the NASDAQ Global Market. The exchange notified the company of the potential delisting in December after Unilife’s stock price fell below $1 for 10 consecutive days in October.

For the company to avoid delisting, the stock price needs to close 10 straight days above $1 by May 31. It has closed at or above $1 seven times in 2016, and the longest streak of consecutive days has been three. If the stock doesn’t rebound, the company could have an additional 180 days to comply, but would be shifted to the NASDAQ Capital Market, a lower-level exchange. Ryan declined to comment on the possible delisting, but the shareholders on Monday approved a 1-to-10 reverse stock split in a effort to avoid being delisted by the end of the month.  

The investigation also comes after Shortall’s resignation in March, and the resignation of the company’s COO, Ramin Mojdeh.

Whether the recent tumult at the Conewago Township company is a sign of continuing problems or the start of a turnaround doesn’t yet seem clear.

“There seems to be progress,” Markey said. “But it’s too early to tell.”