SOURCE: Unilife Medical Solutions

August 18, 2009 11:39 ET

Unilife Medical Solutions Chairman's Letter to Shareholders

LEWISBERRY, PA--(Marketwire - August 18, 2009) - Jim Bosnjak, Chairman of Unilife Medical Solutions (PINKSHEETS: UNIFF) (ASX: UNI), issued the following letter to shareholders:

Dear Shareholders,

I am pleased to advise that Unilife Medical Solutions is well on its way to becoming a global leader in the design, development and supply of innovative safety medical devices for the pharmaceutical and healthcare markets.

In the last few years, the Board has implemented a strategic plan that sought to capitalize upon significant pharmaceutical interest in our technology, strengthen our internal operational capabilities and shift our corporate focus towards the US. This plan is now delivering significant results. We are regularly achieving our scheduled business milestones, establishing strategic relationships with a number of global pharmaceutical leaders and attracting high-caliber industry leaders to our world-class team.

Furthermore, we expect to have generated revenues and other income of approximately AUD $40 million and profit after tax in excess of AUD $11 million for the 2008 / 2009 financial year. These are the un-audited results and are before any necessary audit/late adjustments and/or post balance sheet date events.

On July 1, 2009, Unilife signed an Industrialization Agreement with our major pharmaceutical partner for the Unilife Ready-to-Fill Syringe. The agreement commits our major pharmaceutical partner to pay Unilife approximately AUD $47 million (EUR 27 million) in exclusivity fees and industrialization program payments in exchange for the right to negotiate for the purchase of the product. We are fortunate to have the support of this large and respected partner that is currently the world's largest purchaser of prefilled syringes.

There are more than 20 other pharmaceutical companies that supply injectable drugs in a prefilled format. The Industrialisation Agreement we have signed with our major pharmaceutical partner gives us the commercial freedom to capitalize on the full potential of the Unilife Ready-to-Fill Syringe for it to become the prefilled syringe of choice for pharmaceutical companies. Unilife expects to reach a decision with its major pharmaceutical partner later this year with regard to the therapeutic areas of exclusivity for the Unilife Ready-to-Fill Syringe. At that time, we expect to be in a position to enter into additional agreements with other interested pharmaceutical companies. Initial discussions with several other pharmaceutical companies have already commenced.

The industrialization program for the Unilife Ready-to-Fill Syringe is running well ahead of schedule, with its expected completion by the end of 2010. As a result, Unilife expects to be in a position to commence the supply and sale of the product to pharmaceutical customers within 18 months.

While Unilife has a high-level of expertise in the design, development and operation of automated assembly systems, we have made the considered decision given the extensive scale of our production plans to outsource this component of the project to an established industry specialist. In the last 12 months, Unilife has undertaken an exhaustive review of global specialists with the industry expertise and operational resources necessary to help us meet our production growth targets between now and 2016. We are pleased with the quality of the proposals we have received and expect to make an announcement of the selected supplier for our automated assembly systems later this year.

As a result of these discussions with these potential automated assembly system suppliers, Unilife has been able to increase the projected annual capacities for the Ready-to-Fill Syringe so that we can meet anticipated market demand faster and more cost-effectively than originally envisioned. Given the strong level of interest in the Unilife Ready-to-Fill Syringe from a number of pharmaceutical companies, the competitive position of our technology and the rapid transition of international healthcare markets towards the mandatory use of safety syringes, we believe we are well positioned to reach an industrial capacity in excess of 450 million units beyond 2014 and 850 million units beyond 2016.

As released earlier, Unilife completed a significant Company milestone this month with production of the Unitract 1mL Insulin Syringes commencing at our Lewisberry facility. This eagerly anticipated announcement marks the first time that high-volume production of our Unitract 1mL Syringes has occurred in clean-room conditions. I encourage shareholders to visit our website at www.unilife.com to see a video of the Unitract 1mL Syringe production systems in operation.

The automated assembly line that is now manufacturing our Unitract 1mL Syringes has been fully designed, developed, built and qualified by our in-house team. There are few companies in the world, particularly of our size, which have the core competency in-house to develop innovative medical devices and the automated assembly systems used to manufacture them. This core set of operational strengths is a testament to our success in building a world-class business via the acquisition of IBS and the recruitment of global medical device industry leaders to our team. Initial production will be used to complete accelerated device ageing studies. Unilife will continue to manufacture the Unitract 1mL Syringes and hold them in quarantine until commercial release during the fourth quarter upon completion of the ageing studies.

Unilife has now completed the first stage of consolidating its international business activities into Central Pennsylvania. Since September last year, Unilife has added more than 35 management and senior professional staff to its Lewisberry facility via either recruitment or relocation activities. I have now had the privilege to meet members of this world-class management team, which has an average 23 years experience including working for multinational medical device and pharmaceutical leaders such as Baxter, Medtronic, Teva, Safety Syringes, Resmed, MEDRAD, Biotronik, Tyco, Dentsply, Boston Scientific and Kimberley Clark. The experience and industry backgrounds of this high-caliber team reflect the type of business we are on the way to becoming, and the status of the customers with whom we intend to build long-term relationships.

It is our intention to centralize manufacturing activities for the next phase of our expansion within Pennsylvania. In this way, we hope to reduce expected future business operating costs by improving our economies of scale and drive management accountability in the delivery of key project milestones. We are reviewing a number of options to establish a major facility which can serve as our long-term global headquarters and facilitate the high-volume production of key products such as the Unilife Ready-to-Fill Syringe. It is our intention to transition key elements of our business into this new facility during mid to late 2010. This transition is not expected to have any negative impact on our ability to meet demand for the Unitract 1mL Syringe and the Unilife Ready-to-Fill Syringe.

Finally, we remain well on-track to complete a scheduled listing onto a US stock exchange by the end of this year. The listing of Unilife on a US exchange has been a long-held goal that should facilitate our emergence as a US-based global industry leader for innovative safety medical devices.

On behalf of my fellow Directors, I look forward to keeping you fully updated with the continued implementation of our strategic business plan over the coming year. Thank you again for your continued confidence and support, and I hope to see you at our Annual General Meeting in Sydney this November.

Yours sincerely

Jim Bosnjak OAM
Non-Executive Chairman
Unilife Medical Solutions Limited

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