Leerink Swann analyst Rick Wise initiated coverage of Unilife Corporation (NASDAQ: UNIS) with an 
“outperform” rating and a $5-$6 valuation range, citing shares represent a compelling opportunity to participate in the potentially dramatic growth of a still young company that already has created a solid business platform.
Highlights from the Leerink report include:
- We are initiating coverage of UNIS with an Outperform rating.
- We see UNIS as well positioned in the current environment to sell its drug delivery systems to biopharmaceutical customers for life cycle extensions of injectable drugs and provide competitive differentiation for development stage biologics – all which we expect to be relayed at the upcoming analyst meeting (3/28).
- Despite what we view as a differentiated technology platform with numerous near-term catalysts, we also see a stock down ~40% since its last capital raise (Nov. 2011; versus S&P500) that reflects investor disappointment regarding timing of supply contracts; however, management has consistently pointed to the 2H‟12 as the likely timing for deal announcements.
- We recommend that long-term investors build a position as we believe UNIS offers (1) numerous near-term catalysts with potential for significant upside if a high volume deal is announced; (2) valuation is attractive even using management's most conservative forecast assumptions; and (3) a likely decision in 2Q to invest in a second manufacturing line because it will signal management‟s conviction for product demand. This is tempered by the inherent uncertainty of the licensing process and the need to generate near-term operating cash flow – current cash will last through 1Q'13 (F'3Q'13).
- Our $5-6/shr valuation for UNIS is supported by a discounted cash flow analysis and forward 2-year sales we expect UNIS to trade at 3.6x our 3Q'13 to 2Q'14 sales estimate of $110M.