01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation's annual report for fiscal 2011 shows revenues rising to $743.2 milliona in 2011 from $592.9 million in 2010, a 25.3% increase, with operating income of $317.8 million versus $171.3 million and net income of $217.9 million versus $105.9 million.
Growth was driven by Remodulin ($430.1 millionb, up 6.6%), Tyvaso ($240.4 million, up 58.4%) and Adcirca ($70.6 million, up 94.4%). Net income also benefited from lower share-based compensation expense tied to the decline in the share price under the Share Tracking Award Plans, which reduced operating expenses substantially compared with 2010. The company's pipeline and regulatory position carry significant uncertainty.
The NDA for oral treprostinil was submitted in December 2011 and accepted for a standard 10-month review, but the FREEDOM-C and FREEDOM-C2 trials did not reach statistical significance, which the company acknowledges may limit commercial potential. On February 3, 2012, Sandoz filed a Paragraph IV ANDA challenge to the 10 mg/mL strength of Remodulin, and the company said it intends to vigorously enforce three listed patents. Beraprost-MR failed a phase II trial in November 2011, and the company recorded a $46.3 millionc charge tied to a royalty buy-down with Toray.
Balance sheet activity included repayment of $250.0 milliond in 2011 convertible notes, issuance of $250.0 million of 1.0% convertible notes due 2016, and an accelerated share repurchase of $212.0 million under a $300.0 million program. Cash and marketable investments were $747.4 million at year end, and the company reported $266.8 million of total debt.
02—Key points
Key Highlights
- Total revenues rose 25.3% to $743.2 million in 2011, with Remodulin at $430.1 million, Tyvaso at $240.4 million and Adcirca at $70.6 million.
- Operating income increased to $317.8 million from $171.3 million, and net income rose to $217.9 million, or $3.67 per diluted share, from $105.9 million.
- Remodulin contributed 58% of net revenues in 2011, while Tyvaso contributed 32% and Adcirca 9%, highlighting concentration in a few products.
- The FDA accepted the NDA for oral treprostinil submitted in December 2011 for a standard 10-month review, but the FREEDOM-C and FREEDOM-C2 trials did not achieve statistical significance.
- Sandoz filed a Paragraph IV ANDA challenge on February 3, 2012 against the 10 mg/mL strength of Remodulin, and the company stated it intends to vigorously enforce its patents.
- The company repaid $250.0 million of 2011 convertible notes and issued $250.0 million of 1.0% convertible notes due 2016, while executing a $212.0 million accelerated share repurchase under a $300.0 million program.
- Cash, cash equivalents and marketable investments totaled $747.4 million at December 31, 2011, against debt of $266.8 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, United Therapeutics kept $0.29.
- Revenue$743.2M100.0%
- Cost of revenue−$91.0M12.2%
- Gross profit$652.2M87.8%
- Operating costs−$334.4M45.0%
- Operating income$317.8M42.8%
- Interest, other & tax−$99.9M13.4%
- Net income$217.9M29.3%
Where FY2011 revenue went
$743.2M- Net income: $217.9M, 29% of revenue
- R&D: $180.0M, 24% of revenue
- SG&A: $156.5M, 21% of revenue
- Interest, other & tax: $99.9M, 13% of revenue
- Cost of revenue: $88.9M, 12% of revenue
Kept 29% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $743.18M$592.90M | +25.3% |
| Cost of Revenue | $88.90M$67.67M | +31.4% |
| Gross Profit | $652.19M$524.03M | +24.5% |
| R&D Expenses | $180.01M$165.31M | +8.9% |
| SG&A Expenses | $156.48M$188.61M | −17.0% |
| Operating Expenses | $425.40M$421.59M | +0.9% |
| Operating Income | $317.78M$171.31M | +85.5% |
| Interest Expense | $21.37M$19.71M | +8.4% |
| Net Income | $217.87M$105.92M | +105.7% |
| EPS (Basic) | $3.81$1.89 | +101.6% |
| EPS (Diluted) | $3.67$1.78 | +106.2% |
| Shares Outstanding (Basic) | 57.16M56.14M | +1.8% |
| Shares Outstanding (Diluted) | 59.40M59.52M | −0.2% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and profitability in 2011?
Revenue grew to $743.2 million from $592.9 million, led by Tyvaso sales rising to $240.4 million from $151.8 million and Adcirca rising to $70.6 million from $36.3 million. Remodulin grew 6.6% to $430.1 million. Net income also reflected a sharp reduction in share-based compensation linked to the lower stock price, which lowered operating expenses.
What is the status of oral treprostinil?
The company submitted a new drug application in December 2011 and the FDA accepted it for standard 10-month review. The FREEDOM-M trial met its primary endpoint, but FREEDOM-C and FREEDOM-C2 did not achieve statistical significance. The company said the NDA should be approvable on FREEDOM-M alone but acknowledged approval is not guaranteed and that the other trials could limit labeling and commercial potential. A new phase III trial, FREEDOM-C3, is planned.
What is the threat from the Sandoz ANDA filing?
Sandoz notified the company on February 3, 2012 of a Paragraph IV certification for a generic 10 mg/mL Remodulin, asserting three Orange Book patents are invalid or not infringed. The company has 45 days to sue, which would automatically preclude FDA approval of the ANDA for up to 30 months or until an adverse district court decision. The filing states that adverse outcomes could significantly reduce Remodulin revenue.
How much cash and debt does the company have, and what are its major obligations?
At December 31, 2011, cash, cash equivalents and marketable investments (excluding restricted amounts) were $747.4 million and total debt was $266.8 million. Major obligations include the $250.0 million 2016 Convertible Notes, a $70.0 million mortgage loan, $40.0 million remaining to Toray under a royalty buy-down, and $93.0 million in construction commitments.
What are the main concentration risks for investors?
Remodulin accounted for 58% of 2011 net revenues, and three U.S.-based distributors generated about 81% of revenues. Accredo Health Group alone accounted for 61% of net revenues. The company also noted that the proposed merger between Express Scripts (parent of CuraScript) and Medco (parent of Accredo) could reduce the number of U.S. distributors to two.
06—Continue