01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation's 2008 Form 10-K reports a biotechnology company focused on cardiovascular, infectious disease and cancer products, with Remodulin (treprostinil sodium) as its lead product and substantially all revenue.
Revenues rose to $281.5 milliona in 2008 from $210.9 million in 2007, and Remodulin accounted for $269.7 million, or 96% of net revenues. The company reported a net loss of $42.8 million, or $1.87 per share, compared with net income of $19.9 million in 2007. The loss was driven primarily by a $150.0 million one-time upfront payment to Eli Lilly for rights to tadalafil for pulmonary hypertension, which was expensed as research and development.
The pipeline includes an inhaled treprostinil NDA under FDA review and an MAA under EMEA review, with the company expecting to begin selling inhaled treprostinil in 2009 if approval is obtained. The oral treprostinil FREEDOM-C Phase III trial did not meet statistical significance on its primary endpoint, and the company is redesigning the FREEDOM-M trial and planning FREEDOM-C2. Management does not anticipate filing an NDA for oral treprostinil before 2012.
The OvaRex ovarian cancer program failed its pivotal trials and was terminated. Balance sheet items include cash, cash equivalents and marketable investments of $336.3 millionb, $250.0 million of 0.50% Convertible Senior Notes due October 2011 (classified as non-current at year-end), and stockholders' equity of $507.7 million. Operating cash flow was negative $49.2 million, and the company had $36.8 million (par value) of illiquid auction-rate securities, subject to a Rights Offer put option exercisable from June 30, 2010.
02—Key points
Key Highlights
- Revenue grew to $281.5 million in 2008 from $210.9 million in 2007, with Remodulin contributing $269.7 million, or 96% of net revenues.
- Net loss of $42.8 million ($1.87 per share) in 2008, versus net income of $19.9 million in 2007, primarily due to the $150.0 million upfront payment to Eli Lilly for tadalafil rights expensed as R&D.
- Inhaled treprostinil NDA was submitted to the FDA in June 2008 and remains under review; the company expects to begin selling it in 2009 if approved on its anticipated timeline.
- Oral treprostinil's Phase III FREEDOM-C trial did not meet statistical significance on its primary endpoint (p=0.072 at week 16); the company amended FREEDOM-M and plans FREEDOM-C2, and does not expect to file an NDA before 2012.
- Tadalafil license from Eli Lilly (effective December 18, 2008) covers pulmonary hypertension in the United States and Puerto Rico; the NDA filed by Lilly has an expected action date of May 24, 2009.
- Balance sheet at December 31, 2008 showed cash, cash equivalents and marketable investments of $336.3 million against $250.0 million of Convertible Senior Notes due 2011, with stockholders' equity of $507.7 million.
- Operating cash flow was negative $49.2 million in 2008, and the company held $36.8 million (par value) of illiquid auction-rate securities.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2008, United Therapeutics lost $0.18.
- Revenue$281.5M100.0%
- Cost of revenue−$27.0M9.6%
- Gross profit$254.5M90.4%
- Operating costs−$336.6M119.6%
- Operating income−$82.1M29.1%
- Interest, other & tax$32.7M11.6%
- Net income−$49.3M17.5%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
| Revenue | $281.50M |
| Cost of Revenue | $26.96M |
| Gross Profit | $254.54M |
| R&D Expenses | $239.18M |
| SG&A Expenses | $94.31M |
| Operating Expenses | $363.55M |
| Operating Income | -$82.06M |
| Interest Expense | $11.44M |
| Net Income | -$49.33M |
| EPS (Basic) | $-1.08 |
| EPS (Diluted) | $-1.08 |
| Shares Outstanding (Basic) | 45.80M |
| Shares Outstanding (Diluted) | 45.80M |
05—Questions
Frequently Asked Questions
Why did United Therapeutics report a net loss in 2008 after profits in prior years?
The company recognized a net loss of $42.8 million in 2008, primarily because it expensed $150.0 million in one-time upfront fees paid to Eli Lilly for the tadalafil license and manufacturing and supply agreement. Those fees were charged to research and development because tadalafil had not yet received FDA approval. The company had been profitable from 2004 through 2007.
How dependent is United Therapeutics on Remodulin?
Very dependent. Remodulin generated approximately $269.7 million, or 96%, of 2008 net revenues, and the filing states that substantially all revenues come from Remodulin sales. About 89% of net Remodulin revenues in 2008 came from three U.S. distributors, and one customer, Accredo Therapeutics, accounted for approximately 74% of total net domestic revenues.
What happened with the oral treprostinil and OvaRex programs?
The FREEDOM-C trial of oral treprostinil did not reach statistical significance for its primary endpoint, though the company attributes this partly to patients being unable to titrate to effective doses, and it is redesigning the FREEDOM-M trial and planning FREEDOM-C2. The OvaRex IMPACT I and II pivotal trials for ovarian cancer failed to reach statistical significance, and the company terminated the license and ceased development of that antibody platform.
What are the key debt and liquidity obligations investors should note?
The company has $250.0 million of 0.50% Convertible Senior Notes due October 2011, which were classified as non-current at December 31, 2008 because contingent conversion criteria were not met. It also has a synthetic lease for its Phase I Laboratory with a $32.0 million purchase price and a residual value guarantee of approximately $27.5 million. Cash, cash equivalents and marketable investments totaled $336.3 million at year-end.
06—Continue