01—Abstract
Summary
Summary of the 10-K filed February 25, 2014. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation's 10-K for fiscal 2013 reports total revenues of $1,116,984 thousanda ($1.12 billion), up from $916,076 thousand in 2012, with net income of $174,560 thousand compared with $304,442 thousand in 2012.
Net product sales are driven by Remodulin ($491.2 millionb, 44 percent of net revenues), Tyvaso ($438.8 million, 39 percent) and Adcirca ($177.0 million, 16 percent). Operating income fell to $292,499 thousand from $421,646 thousand, largely because share-based compensation rose sharply: the Share Tracking Award plan liability increased to $288.0 million as the stock appreciated 112 percent during 2013, and research and development expense rose to $299.3 million from $173.4 million, with share-based compensation the main driver. The company's pipeline and regulatory calendar is central to the outlook.
The FDA approved Orenitram (extended-release oral treprostinil) in December 2013, with a commercial launch expected in mid-2014. A Biologics License Application for the Ch14.18 antibody is planned for the first half of 2014 after a Marketing Authorization Application was accepted by the EMA in December 2013. Medtronic completed the DelIVery trial of its implantable pump system for Remodulin, and a Japan marketing application for Remodulin was filed in the third quarter of 2013.
Key risks include Sandoz's Paragraph IV ANDA filings against Remodulin, which the company is contesting in litigation in the U.S. District Court for the District of New Jersey, and a December 2013 subpoena from the HHS Office of Inspector General reflecting a civil investigation by the Department of Justice into marketing practices for Remodulin, Tyvaso and Adcirca. The 2016 Convertible Notes became convertible at holders' election and were reclassified to current liabilities, and the Remodulin patent expiring in October 2014 is set to lapse, which the filing expects to increase gross margins on those products.
02—Key points
Key Highlights
- Total revenues rose to $1,116,984 thousand in 2013 from $916,076 thousand in 2012; Tyvaso revenue grew to $438.8 million and Adcirca to $177.0 million, while Remodulin reached $491.2 million.
- Net income declined to $174,560 thousand from $304,442 thousand, primarily because share-based compensation expense (driven by the 112 percent stock price increase) rose to $320.8 million in operating cash flow adjustments and STAP liability grew to $288.0 million.
- Orenitram was approved by the FDA on December 20, 2013 and is expected to launch commercially in mid-2014.
- A Ch14.18 antibody MAA was accepted by the EMA in December 2013, with a BLA planned with the FDA in the first half of 2014.
- Sandoz filed ANDAs seeking to market generic Remodulin; the company filed two patent infringement lawsuits in the U.S. District Court for the District of New Jersey.
- A December 2013 HHS Office of Inspector General subpoena, reflecting a DOJ civil investigation, requests documents on marketing practices for Remodulin, Tyvaso and Adcirca.
- The company held $1,136.7 million in cash and marketable investments at December 31, 2013, with $250.0 million of 1.0 percent Convertible Senior Notes due 2016 now classified as current because they are convertible at holders' election.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, United Therapeutics kept $0.16.
- Revenue$1.12B100.0%
- Cost of revenue−$141.2M12.6%
- Gross profit$975.8M87.4%
- Operating costs−$683.3M61.2%
- Operating income$292.5M26.2%
- Interest, other & tax−$117.9M10.6%
- Net income$174.6M15.6%
Where FY2013 revenue went
$1.12B- SG&A: $394.0M, 35% of revenue
- R&D: $299.3M, 27% of revenue
- Net income: $174.6M, 16% of revenue
- Cost of revenue: $131.1M, 12% of revenue
- Interest, other & tax: $117.9M, 11% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 25, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.12B$916.08M | +21.9% |
| Cost of Revenue | $131.13M$119.30M | +9.9% |
| Gross Profit | $975.82M$786.83M | +24.0% |
| R&D Expenses | $299.35M$173.39M | +72.6% |
| SG&A Expenses | $394.01M$201.75M | +95.3% |
| Operating Expenses | $824.49M$494.43M | +66.8% |
| Operating Income | $292.50M$421.65M | −30.6% |
| Interest Expense | $18.06M$16.64M | +8.5% |
| Net Income | $174.56M$304.44M | −42.7% |
| EPS (Basic) | $3.49$5.84 | −40.2% |
| EPS (Diluted) | $3.28$5.71 | −42.6% |
| Shares Outstanding (Basic) | 50.08M52.09M | −3.9% |
| Shares Outstanding (Diluted) | 53.23M53.28M | −0.1% |
05—Questions
Frequently Asked Questions
Why did net income fall in 2013 even though revenue grew?
Operating expenses rose to $824.5 million from $494.4 million. The filing attributes much of the increase to share-based compensation tied to the Share Tracking Award plans, which are cash-settled and remeasured with the stock price. Research and development expense rose to $299.3 million from $173.4 million, mainly because of a $134.7 million share-based compensation component. Selling, general and administrative expense rose to $394.0 million from $201.7 million.
What are the main near-term growth catalysts?
The filing points to the mid-2014 commercial launch of Orenitram, the planned 2014 BLA filing for the Ch14.18 antibody, the potential FDA approval of a Remodulin implantable pump system with Medtronic, and expected 2014 launches of Remodulin in Japan and China.
What is the largest legal and regulatory risk disclosed?
The December 2013 subpoena from the HHS Office of Inspector General reflects a civil investigation by the Department of Justice. The company is cooperating and states it cannot predict the outcome, and notes that such subpoenas are often associated with qui tam actions. Potential consequences described include fines, exclusion from federal healthcare programs and a corporate integrity agreement.
When do the company's key patents expire and how could generics affect revenue?
The U.S. patent for treprostinil use in PAH expires in October 2014, and royalty obligations on Remodulin, Tyvaso and Orenitram end at the same time. Sandoz's ANDA challenge targets patents expiring in 2014, 2017 and 2029. The filing states that if generic Remodulin is approved, revenue would decrease, and generic sildenafil already competes with Adcirca.
06—Continue