Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Unilife (UNIS +0.00%), a manufacturer of proprietary injectable drug delivery systems such as pre-filled syringes and wearable injectors, vaulted higher by as much as 33% after announcing a long-term commercial supply agreement with Sanofi (SNY 0.05%) on Monday morning. Shares are up nearly 50% over just the past three trading sessions.
So what: According to the terms of the agreement, Unilife will become the sole provider of wearable injector technology for Sanofi's large dose volume drugs, not including insulin products. As Unilife CEO Alan Shortall pointed out in the press release, this will probably cover between five and 10 of Sanofi's molecules. The agreement is for a minimum period of 15 years. As part of the agreement Unilife will receive an upfront payment as well as $50 million from "customization programs relating to Sanofi molecules and indications." Unilife also announced additional revenue is expected from these customization programs which will be conducted on a collaborative basis with Sanofi.
Wearable injector platform via 2013 annual report. Source: Unilife.
Now what: This huge move higher is nothing more than Unilife shareholders breathing a sigh of relief that their company has garnered additional recurring revenue and that it landed a very lucrative client in Sanofi, which could at a later date expand their agreement even further. Unilife was projected to be on the cusp of profitability by next year, and despite a history of badly missing Wall Street's earnings forecasts over the past year, I believe the Sanofi deal should help them cross that hump decisively. Furthermore, with an upfront cash payment on the way Unilife's relatively thin cash position is no longer a huge concern. All told, there could still be additional upside left in Unilife, but it's going to be dependent on the company meeting or exceeding investors' expectations moving forward.
