NEW YORK ( TheDeal) -- Unigene Laboratories Inc. ( UGNE) on Monday secured a $750,000 senior secured note from Victory Park Capital Advisors LLC to provide it with necessary working capital as the lender plans to sell certain Unigene assets at an auction on April 15. Boonton, N.J.-based Unigene, a manufacturer of peptide-based drugs, said it had reached a deal with Victory Park Capital Advisors to extend its ability to operate. The $750,000 note is convertible into the company's common stock, the statement said. Unigene spokesman Joshua Drumm of Tiberend Strategic Advisors Inc. was unaware of how much time the new note would buy the company. Nor was he able to provide the note's pricing or provide the interest rate or maturity date of the note. Chicago-based Victory Park is an asset management firm that specializes in direct credit and control equity investing in middle-market and distressed companies. Calls to Victory Park weren't returned Monday. Unigene has $74.5 million in total debt. The company owes $47.82 million in principal plus $5.6 million in interest to Victory Park Capital Advisors and its affiliates Victory Park Management LLC, Victory Park Credit Opportunities LP, VPC Fund II LP, VPC Intermediate Fund II (Cayman) LP and Victory Park Credit Opportunities Intermediate Fund LP, for various promissory notes due on Sept. 21. Unigene is in default on the notes and doesn't have the cash to repay them, filings with the Securities and Exchange Commission said. According to Unigene's statement on Monday, Victory Park Capital declared approximately $55.8 million in notes payable immediately because of the default. The lender has initiated an auction of certain Unigene assets that Victory Park Capital has a lien on, including its patented therapeutic peptide drug delivery platform called Peptelligence, as well as other assets. The assets will be sold at a public auction, under Article 9 of the Uniform Commercial Code, on April 15 in the Katten Muchin Rosenman LLP office in Chicago, the statement said. "We value VPC's ongoing support and willingness to continue financing the company," Unigene CEO Ashleigh Palmer said in the statement Monday. "Unigene remains focused on our efforts to conserve capital during these adverse conditions and challenging times."
Unigene cut its workforce by 40% on April 1 as part of its strategic reorganization. The majority of the company's workforce that was laid off worked on the company's Fortical manufacturing and recombinant calcitonin production operations. Unigene had 53 full-time employees as of Feb. 28, SEC filings said. Unigene's only product to reach the market to date, Fortical, a nasal spray that received approval from the Food and Drug Administration in 2005 and is marketed by Upsher-Smith Laboratories Inc. for the treatment of postmenopausal osteoporosis, has run into trouble lately. Unigene has licensed to Upsher-Smith its patented nasal formulation of calcitonin. The European Medicines Agency, the European Union's regulatory body on pharmaceuticals, on July 20 concluded that there was evidence of a small increased risk of cancer with long-term use of current calcitonin medications such as Fortical. In August, another regulator, Health Canada, announced that it was reviewing whether to follow the European medical authorities and restrict use of the nasal spray because of the increased risk of cancer. Then, on March 5, an FDA advisory committee concluded, in a 12-9 vote, that the benefits of calcitonin salmon for the treatment of postmenopausal osteoporosis don't outweigh a potential risk of cancer. The advisory committee found that calcitonin products, including Fortical, should not be marketed broadly. The committee also voted 20-1 that fracture prevention data should be required for the approval of new oral calcitonin products in development for osteoporosis prevention and treatment. "We view the reduction in workforce as an unfortunate, but necessary part of our path forward in continuing to explore and develop strategic options to protect and enhance shareholder value," Palmer said in the statement. Unigene has been working with financial adviser Canaccord Genuity Inc. to explore and evaluate a range of strategic options, including partnering its technology, licensing its intellectual property, divesting certain assets and selling the company. Eugene Rozelman, a managing director at Canaccord Genuity who is working with Unigene, refused to comment. Unigene hasn't given much clarity on its strategy going forward, Drumm said. Unigene has always operated at a loss and has a $216.63 million accumulated deficit. The company reported a $34.3 million net loss for the year ended Dec. 31.
Unigene's stock, which trades on the Pink Sheets under the symbol UGNE, closed at 7 cents on April 5. It was trading at 5 cents midday on Monday. Activist investor Wynnefield Capital Inc. held an almost 7.2% stake in Unigene's stock as of Dec. 31, according to data provider Thomson Reuters. Wynnefield couldn't be reached for comment Monday. Victory Park holds 10% of the company's outstanding stock, SEC filings said. Richard Levy, the founder of Victory Park Capital, who serves as the chairman of the board of directors for Unigene, couldn't be reached for comment Monday. Written by Jamie Mason in New York