Note 14 - Nordic Bioscience

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Text Block]

NOTE N - NORDIC BIOSCIENCE

In October 2011, we and Nordic Bioscience announced our decision to establish a Joint Development Vehicle (“JDV”) to progress up to three of our internally developed, proprietary calcitonin analogs through Phase 2 proof-of-concept in humans for the treatment of Type 2 diabetes, osteoarthritis and osteoporosis.  In exchange for a 50% ownership interest in the JDV, Unigene and Nordic were to contribute $100,000 and $1,000,000, respectively, towards the incorporation of the JDV as a Swiss GmbH. Pursuant to a First Amendment to the Joint Development Agreement dated August 15, 2012, the initial contributions to be made by Unigene and Nordic were $50,000 and $950,000, respectively. The initial contributions were funded on August 15, 2012. 

In addition to the option for an exclusive, royalty free license grant, it is anticipated that we will supply to the JDV, without charge, the analogs selected for development by the JDV for preclinical studies and, thereafter, manufacture sufficient quantities of the selected lead analog for clinical trials. In exchange for a 50% ownership of the JDV, Nordic is responsible for conducting and fully funding all preclinical, toxicology and clinical development through Phase 2 proof-of-concept for the Type 2 diabetes indication.  In August 2012, we announced, under the JDV, the preliminary selection of the lead compound for the Type 2 diabetes indication (UGP302) and executed certain agreements ancillary to the Joint Development Agreement dated October 2011.

The Company and Nordic Bioscience each maintain 50% of the JDV voting rights and all decisions must be pursuant to a unanimous vote and neither party has the ability to overrule the other party in the event of a disagreement. The Company has determined that JDV is a variable interest entity as the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties..  The Company will not consolidate the financial statements of the JDV since the Company is not the primary beneficiary of the entity as a result of the Company not having the ability to direct the activities of the JDV.  As such, the Company will account for its investment in the JDV under the equity method, whereby the initial carrying value of the investment represents the $50,000 cash contribution.  We will adjust the carrying value of the JDV investment based on our 50% share of the earnings or losses of the JDV as well as for the book value of analogs contributed to the JDV.  As of September 30, 2012, the carrying value of the JDV investment was $56,000, which consisted of the initial cash contribution of $50,000 and analogs contributed to the JDV with a carrying value of $6,000.  The JDV investment is classified within other assets in the accompanying balance sheet.