NEWS
Unilife
Commences Development of New Global Headquarters and
Commercial Production Facility in Pennsylvania
Unlife Medical Solutions
December 16, 2009
World Class Custom-Designed Facility to Have
First-Stage Manufacturing Capacity of up to 360 Million
Syringes Annually; First Stage Scheduled for Completion
in Late 2010
Lewisberry, PA - (Marketwire-December 16, 2009) -
Unilife Medical Solutions Limited (Unilife or the
Company) (ASX: UNI) (PINKSHEETS: UNIFF) today announced
the signing of agreements for the construction of
its new global headquarters and commercial production
facility in York, Pennsylvania. The world-class medical
device production facility (New Facility) will be
situated at 250 Cross Farm Lane in York and the 165,000
square foot development is projected to be ready for
operations by late 2010.
As previously announced, the Company has been exploring
a number of potential opportunities with respect to
the development of a new global headquarters and manufacturing
facility for the Unilife Group in Pennsylvania in
order to accommodate the Company's projected pharmaceutical
demand for its Unifill™ range of readyto- fill (prefilled)
retractable syringes. The Company has now decided,
after carefully considering the advantages and disadvantages
(including from a financial and operational perspective)
of leasing and retrofitting an existing logistics
warehouse facility or developing its own custom built
facility, to proceed with the development of its own
custom-built facility.
The New Facility will be developed on a 38 acre parcel
of industrial land with an expected total project
cost of US$26 million, which will be funded by a combination
of debt and cash reserves. The land was purchased
by Unilife Cross Farm, LLC (Unilife CF), a subsidiary
of Unilife Corporation, for US$1,990,725.
Stage one of the New Facility is designed to accommodate
Unifill™ automated assembly lines with a combined
annual capacity of 360 million units per year, as
well as the Unitract™ 1mL automated assembly line
and other contract manufacturing systems currently
situated at Unilife's Lewisberry facility. It will
also include a 54,000 square foot office section that
will function as Unilife's global headquarters and
support administrative, marketing, new product development,
quality laboratories and other operational functions
of the Company.
The New Facility has been designed to allow for an
additional 100,000 square feet of contiguous production
space to be readily constructed at a later date by
the Unilife Group. Upon this additional expansion
occurring, it will provide the Unilife Group with
the necessary space to produce up to one billion syringes
per annum via installation of additional Unifill™
assembly lines. Although this additional expansion
of the New Facility forms part of the current planning
approvals that have been received by the Unilife Group,
it is not part of the current development activity
and it is not covered or included in the current contracts
that have been entered into in respect of the New
Facility.
While the potential development of a new manufacturing facility was referred to in the Information Memorandum dated 27 November 2009 (sent to shareholders and
optionholders in relation to the proposed transaction to redomicile the Unilife Group in the US), as a result of the commitment now being made by the Company to
proceed with the development of the New Facility and to enter into construction and related contracts, a Supplementary Information Memorandum explaining the
development of the New Facility will shortly be despatched to shareholders and optionholders of the Company in accordance with relevant legal requirements.
Design and Functionality of New Facility
The New Facility has been custom-designed to meet Unilife's requirements by L2 Architecture (L2), a Philadelphia-based architectural and engineering design firm that
specializes in the pharmaceutical and medical device sector and which has some of the leading global companies in that sector as its clients. The design created by L2
incorporates the latest innovations in personnel and material flow dynamics to maximize the industrial productivity of the site while adhering to the highest standards
in good manufacturing practices.
Development of New Facility and Development Costs
Unilife CF has appointed Keystone Redevelopment Group
LLC (Keystone) to manage the development of the New
Facility, and HSC Builders and Constructions Managers
(HSC) to undertake the construction of the New Facility.
Keystone is a Pennsylvania based real estate company
specialising in large scale redevelopment and complex
economic development projects. Clients of Keystone
have included a number of Fortune 500 companies. HSC
is a Pennsylvania-based company that specialises in
building custom-designed facilities for biotech, academic,
healthcare, pharmaceutical and technology companies.
Its clients include some of the largest pharmaceutical
and healthcare companies in the world.
Under the Development Agreement entered into between Unilife CF and Keystone for the development of the New Facility, Keystone will, in return for a US$754,000
development fee to be paid over four tranches spanning the course of the project, work with Unilife to obtain favourable public and private financing, and assist in
securing all necessary approvals, licenses, permits and certificates from government authorities.
Under the construction contract with
HSC, Unilife CF is required to pay for the cost of
construction (as defined in the construction contract)
(Cost of Work), together with HSC's fee, subject to
a Guaranteed Maximum Price (GMP) as described below.
HSC's fee for constructing the New Facility will be
an amount equal to 1.25% of the Cost of Work (HSC
Fee). The GMP has been established at US$21,700,000
(comprising HSC's fee and the Cost of Work). Except
for certain items beyond the control of Unilife CF
or HSC, or items changed at the option of Unilife
CF, any construction costs which exceed the Cost of
Work will be the responsibility and liability of HSC.
Unilife CF has also agreed to pay HSC a performance
bonus of 15% of the HSC Fee if it achieves completion
of the utility rooms for equipment installation at
the New Facility by 15 April 2010 and another 15%
of the HSC Fee as a bonus if it achieves Phase 2 (see
below) of the construction by 10 December 2010. L2's
fee for the agreed architectural services it will
be providing to the Company in respect of the project
will be US$1.56 million.
Key Development Timelines
To support the scheduled completion of the Unifill™
syringe industrialisation program in late 2010, Unilife
has fast-tracked the development of the New Facility
with the aim of having it ready in time to receive
the first Unifill™ assembly line currently being developed
by Mikron. Initial site work for the New Facility
has been commenced with the footings and concrete
being poured this month.
The projected timetable for the construction of the
New Facility to be undertaken by HSC is as follows:
-- By the end of October 2010 Completion
of clean rooms for equipment installation (Phase 1)
-- By the end of October 2010 Temporary
occupancy permit for manufacturing/warehouse
-- By the end of December 2010 Unrestricted
occupancy permit for manufacturing/warehouse (Phase
2)
-- By the end of December 2010 Unrestricted
occupancy permit for office.
Unilife is currently projecting that it will progressively
transfer and ultimately consolidate all of its US-based
staff and production systems from its current Lewisberry
facilities into the New Facility in early 2011. The
New Facility is located approximately 9 kilometres
from the Lewisberry facilities.
Financing of the New Facility
Unilife intends to fund up to US$9 million of the
development costs of the New Facility out of existing
cash reserves and will seek external financing for
up to a further US$17 million from a commercial bank
or other lending institution in the US as well as
from the Commonwealth of Pennsylvania and other US
federal and state bodies.
As at the date of this announcement, the Company is
in discussions with a number of banks, government
agencies and other interested parties in the US with
respect to the required financing for the New Facility.
The Company has received term sheets from two US banks
and the current indications are that the Company will
receive financing terms that it considers appropriate
and favourable within the timeframe required. The
Company will select the party or parties to provide
the financing after a careful review of the proposed
financing terms and other factors such as the relevant
party's financial strength.
Compared to original quotations to lease and internally
retrofit a suitable logistics site, Unilife estimates
that it will save approximately US$2 to $3 million
in upfront development costs to develop its custom-built
New Facility. In addition, Unilife estimates that
loan repayments for the New Facility will be approximately
US$400,000 per year less than equivalent annual lease
commitments.
Statement from Unilife CEO Alan Shortall
"Unilife is committed to becoming a global leader
in the fast-growing pharmaceutical market for prefilled
syringes. Given the competitive advantages of our
Unifill™ ready-to-fill syringes, the current status
of our industrialisation program and the strong relationships
we are building with pharmaceutical customers, it
is essential that we have the operational capability
to support significant levels of market demand. Given
the level of this pharmaceutical interest and our
desire to stay ahead of schedule in the industrialisation
of the Unifill™ syringe, we are now fast-tracking
the development of a new facility.
"Our new global headquarters and production facility
that is now being developed in York, Pennsylvania
will give us the required flexibility to rapidly expand
our business as we move towards a NASDAQ listing,
commercial production and the signing of supply agreements
with current and future pharmaceutical customers.
"This world-class facility now under construction
has been custom-designed to meet the highest standards
of the international pharmaceutical industry. The
operational efficiencies and material flow dynamics
that have been incorporated into the design of this
facility will facilitate the production of our products
to the highest quality standards. This will enhance
our industry credentials and our position to become
a reliable and trusted supply partner to global pharmaceutical
leaders.
"The development of our own custom-built facility
makes sound, financial, operational and logistical
sense for Unilife. By comparison, a leased warehouse
site would have required a significant investment
to internally retrofit the building to meet our specific
operational requirements, and would have been substantially
more expensive for annual lease payments. We are pleased
with the strong interest this project has received
from private financing groups as well as Federal,
Commonwealth and local government agencies within
the US. As a result, we are confident that this US$26
million project will be financed in a way that best
meets the short and long-term interests of shareholders.
This is another indication of Unilife taking advantage
of its strong market position, preparing for its rapid
business expansion, and building long-term shareholder
value."
Statement from Unilife Senior Vice-President of Operations
Bernhard Opitz
"Upon completion of stage one of the new facility,
it will have the capacity to support the production
of 360 million units of our proprietary syringes per
annum. When we decide to proceed with the 100,000
square foot extension to the facility, we will then
have the ability to increase our production capacity
to up to one billion syringes per year.
"Unilife has aligned itself with respected US
leaders in the design and development of world-class
pharmaceutical and medical device facilities. These
development partners for our new facility are committed
to its rapid construction so that the site is ready
to accept the scheduled delivery of the first commercial
assembly line for our Unifill™ syringes during the
third quarter of 2010."
Statement from Keystone Manager Robert Ventresca
"As a result of the current economic slowdown,
the US construction industry has been hit especially
hard. This dynamic in the construction market puts
Unilife in a very strong position to build its new
facility at this time. Recent trends indicate construction
costs are as much as 25% to 30% below equivalent price
levels from two years ago.
"With a corresponding slowdown in the financial
markets, lending institutions, while remaining very
cautious, also still need to originate new loans and
are doing so very selectively. Unilife is in a strong
position to take advantage of the current environment
and secure a competitive financing package for the
construction of its new facility with high quality
developers that will leverage an optimal blending
of private bank financing with Federal, State and
local financial incentives."
Correction of Information Memorandum despatch date
It was stated in the announcement made by the Company
on 10 December 2009 that the Information Memorandum
in respect of the proposed transaction to redomicilie
the Unilife Group in the US had been despatched to
shareholders and optionholders of the Company on that
date. However, the Company would like to confirm that
despatch of the Information Memorandum to shareholders
and optionholders actually occurred on 11 December
2009, rather than 10 December 2009 as stated in the
initial announcement.
About Unilife
Unilife Medical Solutions Ltd is an ISO 13485 certified
company that designs, develops and supplies innovative
safety medical devices. Listed on the Australian Securities
Exchange (ASX: UNI) since 2002, Unilife has FDA-registered
manufacturing facilities in the US State of Pennsylvania
and a proprietary portfolio of clinical
and prefilled safety syringes designed for use within
healthcare and pharmaceutical markets.
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Brochure Package or please address inquiries to:
Keystone Companies Group, Inc.
242 Wood Street
Doylestown, PA 18901
215-348-7533 (main office)
215-348-7532 (fax)
Rob Loughery: rob@keystoneredevelops.com
Greg Ventresca: gav@keystoneredevelops.com
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