01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation's 2012 Form 10-K reports total revenues of $916.1 milliona for 2012, up from $743.2 million in 2011, with net income of $304.4 million ($5.71 diluted EPS) compared with $217.9 million in 2011.
Remodulin contributed $458.0 millionb (50% of net revenues), Tyvaso $325.6 million (36%) and Adcirca $122.5 million (13%). Revenue growth was driven by continued growth in the number of patients prescribed the company's PAH products, with Tyvaso and Adcirca growing fastest. The filing highlights a significant regulatory setback: the FDA issued a complete response letter in October 2012 declining to approve the NDA for oral treprostinil.
The company resubmitted in January 2013, with a targeted FDA response date of March 31, 2013, and the company now aims for FDA approval before the end of 2016. Additionally, Sandoz Inc. filed an ANDA seeking to market generic versions of Remodulin, and United Therapeutics has sued Sandoz in the U.S. District Court for the District of New Jersey. The company's Remodulin patent covering PAH treatment expires in October 2014, and other key patents run to 2017 and 2029.
The balance sheet remained solid, with cash and marketable investments of $784.9 millionc, a $188.0 million share repurchase program completed during 2012, and a new $420.0 million repurchase authorization announced in February 2013. Debt totaled $276.3 million, including $250.0 million of 1.0% convertible senior notes due 2016.
02—Key points
Key Highlights
- Total revenues rose to $916.1 million in 2012 from $743.2 million in 2011; net income was $304.4 million, or $5.71 per diluted share.
- Remodulin revenues were $458.0 million (50% of net revenues), Tyvaso $325.6 million (36%) and Adcirca $122.5 million (13%).
- The FDA issued a complete response letter on October 23, 2012 declining to approve the oral treprostinil NDA; a resubmission was filed in January 2013 with a targeted response date of March 31, 2013.
- Sandoz Inc. filed an ANDA to market generic Remodulin; the company filed lawsuits against Sandoz in March 2012 and January 2013 for patent infringement.
- Cash, cash equivalents and marketable investments totaled $784.9 million at December 31, 2012, after $188.0 million of share repurchases in 2012.
- A new share repurchase program of up to $420.0 million was authorized, effective over one year beginning March 4, 2013.
- Other, net included an approximately $31.0 million gain from insurance proceeds from the settlement with Lexington Insurance Company in 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, United Therapeutics kept $0.33.
- Revenue$916.1M100.0%
- Cost of revenue−$129.3M14.1%
- Gross profit$786.8M85.9%
- Operating costs−$365.2M39.9%
- Operating income$421.6M46.0%
- Interest, other & tax−$117.2M12.8%
- Net income$304.4M33.2%
Where FY2012 revenue went
$916.1M- Net income: $304.4M, 33% of revenue
- SG&A: $201.7M, 22% of revenue
- R&D: $173.4M, 19% of revenue
- Cost of revenue: $119.3M, 13% of revenue
- Interest, other & tax: $117.2M, 13% of revenue
Kept 33% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $916.08M$743.18M | +23.3% |
| Cost of Revenue | $119.30M$88.90M | +34.2% |
| Gross Profit | $786.83M$652.19M | +20.6% |
| R&D Expenses | $173.39M$180.01M | −3.7% |
| SG&A Expenses | $201.75M$156.48M | +28.9% |
| Operating Expenses | $494.43M$425.40M | +16.2% |
| Operating Income | $421.65M$317.78M | +32.7% |
| Interest Expense | $16.64M$21.37M | −22.1% |
| Net Income | $304.44M$217.87M | +39.7% |
| EPS (Basic) | $5.84$3.81 | +53.3% |
| EPS (Diluted) | $5.71$3.67 | +55.6% |
| Shares Outstanding (Basic) | 52.09M57.16M | −8.9% |
| Shares Outstanding (Diluted) | 53.28M59.40M | −10.3% |
05—Questions
Frequently Asked Questions
Why did the FDA decline to approve oral treprostinil, and what is the path forward?
On October 23, 2012, the FDA issued a complete response letter declining to approve the NDA. The company resubmitted the NDA in January 2013, with a targeted FDA response date of March 31, 2013. The company remains committed to further studying oral treprostinil, including the FREEDOM-EV phase III trial, and aims to obtain FDA approval before the end of 2016, though approval is not assured.
How significant is the generic challenge to Remodulin?
Sandoz Inc. submitted an ANDA seeking approval of generic versions of Remodulin, initially for the 10 mg/mL strength and later amended for the 1 mg/mL, 2.5 mg/mL and 5 mg/mL strengths. Under the Hatch-Waxman Act, the FDA is precluded from approving the ANDA for up to 30 months. Remodulin accounted for 50% of 2012 net revenues, and the filing states that the outcome of the litigation could significantly reduce Remodulin revenues.
How concentrated are the company's revenues?
In 2012, 56% of total net revenues came from one customer, Accredo Health Group, Inc., and 78% came from the three U.S.-based specialty pharmaceutical distributors. Sales of Remodulin and Tyvaso comprise virtually all of revenues, and the company relies on third parties to produce, market and distribute its products.
What is the company's capital return and debt position?
The company repurchased about 4.0 million shares for $188.0 million in 2012 and has never paid cash dividends. Debt totaled $276.3 million at year-end 2012, including $204.7 million carrying value of 1.0% convertible senior notes due 2016 with a $250.0 million principal balance, and a $70.0 million mortgage credit agreement. The company was in compliance with its covenants at December 31, 2012.
What drove the increase in operating expenses in 2012?
Selling, general and administrative expense rose to $201.7 million from $156.5 million, driven in part by a $17.6 million share-based compensation expense versus a $7.7 million benefit in 2011, as the stock price appreciated about 13% during 2012. General and administrative expense also rose, including a $6.8 million impairment related to the Revivicor contract-based intangible asset. Research and development expense was $173.4 million, down from $180.0 million, largely because 2011 included a $46.3 million charge related to the Toray license amendment.
06—Continue