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 ready-to-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