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Note 1 - Liquidity
3 Months Ended
Mar. 31, 2013
Liquidity Disclosure [Policy Text Block]
1.    Liquidity

At March 31, 2013, the Company had cash and cash equivalents of $353,000, a decrease of $3,460,000 from December 31, 2012. The decrease was primarily due to net cash used in operating activities of $3,406,000. The Company has incurred annual operating losses since its inception and as a result, at March 31, 2013, had an accumulated deficit of approximately $214,649,000.

As of March 31, 2013, the Company’s total principal debt, inclusive of capital lease obligations and accrued interest, was $79,509,000.  On April 8, 2013, the Company entered into a second amendment to a financing agreement with affiliates of Victory Park Capital Advisors, LLC (“VPC”), whereby VPC purchased an additional $750,000 senior secured note, providing the Company with additional working capital (see Note 18).  On May 7, 2013, the Company and Nordic Bioscience entered into an equity transfer agreement pursuant to which Nordic Bioscience agreed to purchase the Company’s entire ownership interest in a joint venture between the parties (see Note 12) in exchange for a payment of $1,000,000, which was received on May 13, 2013 (see Note 18).  Pursuant to the terms of a forbearance agreement with VPC, the proceeds received from the transaction were required to be remitted to VPC to be applied to the outstanding senior secured notes.  The Company will need to obtain significant additional financing in the near term to fund operations, address its current debt and restructure its balance sheet.   In the event that the Company is unable to secure additional sources of cash, it will not be able to fund operations beyond June 15, 2013 and the Company will be forced to cease operations.  The Company is currently in discussion with potential lenders in regards to obtaining additional financing, however, there can be no assurance that any lender will provide additional funding.  

The Company has licensed to Upsher-Smith Laboratories, Inc. (“USL”) its patented nasal formulation of calcitonin for commercialization in the United States and has licensed the development and worldwide commercialization rights (except China) for its Phase 3 oral calcitonin to Tarsa Therapeutics, Inc. (“Tarsa”).  On March 5, 2013, the U.S. Food and Drug Administration (“FDA”) held an advisory committee meeting to discuss whether the overall benefit-risk assessment of calcitonin salmon products supports their continued marketing for the treatment of post-menopausal osteoporosis.  The advisory committee concluded that the benefits of salmon calcitonin products, including Fortical, do not outweigh the potential risks associated with their use and as a result, should not continue to be broadly marketed.  Additionally, it was recommended that fracture prevention data be required for the approval of new calcitonin products in development for osteoporosis prevention and treatment, such as the oral calcitonin product being developed by Tarsa.  The FDA will assess the recommendations and may or may not concur with the advisory committee.  The FDA has not yet issued a response to the advisory committee recommendations. The Company believes that the advisory committee recommendations have had and will continue to have a material adverse impact on the Company’s financial condition and operations by reducing or eliminating sales and royalties on Fortical, limiting the value of current calcitonin development projects and limiting the potential value of its investment in Tarsa. 

Due largely in part to the FDA advisory committee recommendation, in 2013, the Company has not received and does not anticipate receiving additional orders for Fortical in the near term.   As a result of the cessation of Fortical production activities and uncertainty regarding any future production requirements, the Company has concluded that its existing assets associated with Fortical are impaired.  The Company’s assessment of the carrying value of such assets resulted in the write-off of fixed assets of $675,000, patents of $309,000 and inventories of $1,636,000 in the three months ended March 31, 2013.

On April 1, 2013, in an effort to conserve capital and further extend its cash runway, the Company implemented a strategic reorganization and downsizing which involved a reduction of approximately 40% of the Company’s workforce, with the majority of affected employees having supported the Company’s Fortical manufacturing and recombinant calcitonin production operations.  In recent months, Fortical manufacturing and royalty revenues have been negatively impacted by the regulatory recommendations pertaining to the use of calcitonin salmon.  The Company estimates that it will incur approximately $250,000 in charges related to the reduction in force, all of which would result in cash expenditures for one-time employee termination benefits and associated costs. The related charges were recorded in the second quarter of 2013.  As a result of the reduction in force, the Company does not currently have the ability to manufacture Fortical.

On April 5, 2013, the Company received a Notice of Public Sale of Collateral Under Illinois Uniform Commercial Code (the “Notice”) from Victory Park Management LLC, which stated that the Lenders (see Note 7) proposed to initiate a public foreclosure sale on April 15, 2013 in accordance with Article 9 of the Uniform Commercial Code (“UCC”) for the sale of certain of the Company’s assets that secure the senior secured notes issued to the Lenders by Unigene (the “Proposed Sale”), of all of the personal property assets of the Company pledged as collateral under the Restated Financing Agreement (see Note 7) and related documents that relate to the Company’s Biotechnologies Strategic Business Unit (“SBU”), including such assets that are used or intended for use in connection with, or that are necessary or advisable to the continued conduct of, the Company’s Biotechnologies SBU as currently being conducted (but excluding those assets of the Company that are not related to the Biotechnologies SBU). The Lenders made a credit bid of $15,000,000 and, at the conclusion of the public auction on April 16, 2013, were deemed the highest bidder for the assets.  The assets, which had a carrying value of approximately $2,200,000 as of March 31, 2013, were acquired by the Lenders and contributed to an affiliate of the Lenders on April 25, 2013 in exchange for the satisfaction and discharge of $15,000,000 outstanding under the senior secured notes. As a result, as of April 25, 2013, the Company will no longer benefit from revenues associated with development work, feasibility studies or the potential related licensing and milestone revenues generated by the Biotechnologies SBU.

Due to the Company’s limited financial resources, the decline and potential elimination of Fortical sales and royalties, the sale of the Company’s Biotechnologies SBU and loss of the associated revenues, its inability to restructure its existing Victory Park and founders debt and its inability to raise cash to fund operations, the Company requires significant financial resources in order to avoid the cessation of operations.

The Company will need to secure another source of funding in order to satisfy its working capital needs. If the Company is not able to generate additional cash, it will not have the ability to continue as a going concern. The Company believes that satisfying its cash requirements over the long term will require the restructuring of its balance sheet to eliminate the outstanding debt in addition to the successful development and commercialization of its licensed oral calcitonin product, its oral parathyroid hormone (“PTH”) product, the obesity program (UGP 281) or the diabetes program (UGP 302).  However, it is uncertain whether any new products will be developed or approved or will be commercially successful. The amount of future revenue, if any, that the Company will derive from Fortical is also uncertain.

Cash received during the quarter ended March 31, 2013 was primarily from development work and fee-for-service feasibility studies for various companies. The Company’s primary sources of cash have historically been (1) licensing fees for new agreements, (2) milestone and other payments under licensing or development agreements, (3) bulk peptide sales under licensing or supply agreements, (4) loans from its founders and Victory Park, (5) the sale of its common stock, (6) Fortical sales and royalties and (7) the proceeds from the sale of state net operating loss carry-forwards.. There can be no assurance that any of these cash sources will continue to be available to the Company in the future. Moreover, the revenues received in the first quarter primarily related to the Company’s Biotechnology SBU.  Those assets have subsequently been sold and as a result, the Company will not receive revenues from such sources in the future. The Company is seeking additional licensing and/or supply agreements with pharmaceutical companies for its oral peptides, including PTH and its obesity peptide (UGP 281). In October 2011, the Company established a Joint Development Vehicle with Nordic Bioscience and on May 7, 2013, sold its share of the related interest to Nordic Bioscience (see Notes 12 and 18). Milestone payments are based upon progress achieved in collaborations, which cannot be guaranteed, and are often subject to factors that are controlled neither by the Company or its licensees. Product sales to the Company’s partners under these agreements are based upon its licensees’ needs, which are sometimes difficult to predict. Sale of the Company’s common stock is dependent upon its ability to attract interested investors, its ability to negotiate favorable terms and the performance of the stock market in general and biotechnology investments in particular. Future Fortical sales and royalties, if any, will also be affected by competition and continued acceptance in the marketplace and could be impacted by manufacturing, distribution or regulatory issues.   The Company may not be successful in achieving milestones under its current agreements, raising capital to successfully develop its candidates in obtaining regulatory approval for its other products or in-licensing any of its other products or technologies.

On December 11, 2012, the Company announced that it has retained an investment banker to assist the Company with its exploration and evaluation of a broad range of strategic options, including, but not limited to, the strategic partnering of its technology, the out-licensing of intellectual property and divestiture of certain assets, and the possible sale of the Company or one or more of its business units.  The evaluation of strategic initiatives remains on-going.

Going Concern

The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements included in this Quarterly Report on Form 10-Q have been prepared on a going concern basis and as such do not include any adjustments that might result from the outcome of this uncertainty.