01—Abstract
Summary
Summary of the 10-K filed February 24, 2015. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation's 10-K for fiscal 2014 reports total revenues of $1,288.5 milliona, up 15.4% from $1,117.0 million in 2013, with net income of $340.1 million, or $6.28 per diluted share, versus $174.6 million in 2013.
Remodulin contributed $553.7 millionb, Tyvaso $463.1 million, Adcirca $221.5 million and Orenitram $41.3 million, the latter in its first year of sales following its December 2013 FDA approval. Operating income rose to $538.8 million from $292.5 million, largely because share-based compensation expense fell to $190.1 million from $320.8 million as the stock price rose less sharply in 2014 than in 2013. Cash, cash equivalents and marketable investments declined to $812.9 million from $1,136.7 million, reflecting $483.1 million of share repurchases, $111.3 million of early Convertible Notes conversions, and $144.1 million of cash-settled share tracking award exercises.
The filing highlights substantial reliance on three treprostinil-based products and the Adcirca PDE-5 inhibitor, which together comprise substantially all revenue. Patent exposure is significant: Sandoz and Teva have filed ANDAs seeking to market generic Remodulin, and in August 2014 the District of New Jersey court ruled that U.S. Patent No. 6,765,117 is valid and enforceable, enjoining Sandoz until its October 2017 expiration, an order Sandoz has appealed. The filing also discloses a December 2013 subpoena from the Office of Inspector General of the Department of Health and Human Services relating to marketing practices for Remodulin, Tyvaso and Adcirca, which the company is cooperating with and whose outcome it cannot predict.
Pipeline milestones include a Remodulin Implantable System PMA submitted by Medtronic to the FDA in December 2014, with a new NDA submitted in January 2015, and an FDA BLA accepted in June 2014 for the ch14.18 antibody for neuroblastoma. The company also reported that Chief Financial Officer John Ferrari will retire effective March 13, 2015, succeeded by James Edgemond.
02—Key points
Key Highlights
- Total revenues rose 15.4% to $1,288.5 million in 2014, with net income of $340.1 million, or $6.28 per diluted share, compared with $174.6 million in 2013.
- Remodulin revenue reached $553.7 million (43% of total net revenues), Tyvaso $463.1 million (36%), Adcirca $221.5 million (17%), and Orenitram $41.3 million (3%) in its first year of commercial sales.
- Share-based compensation expense fell to $190.1 million from $320.8 million, which drove the increase in operating income to $538.8 million from $292.5 million.
- Cash, cash equivalents and marketable investments declined to $812.9 million from $1,136.7 million after $483.1 million in share repurchases and $111.3 million in early Convertible Notes conversions.
- Sandoz and Teva have filed ANDAs to market generic Remodulin; a August 2014 court ruling upheld the validity of Patent No. 6,765,117 and enjoined Sandoz until its October 2017 expiration, and Sandoz has appealed.
- A December 2013 OIG subpoena relating to marketing practices for Remodulin, Tyvaso and Adcirca remains under investigation by the Department of Justice, and the company cannot predict its outcome.
- Medtronic submitted a PMA to the FDA for the Remodulin Implantable System in December 2014, and the company submitted a new NDA in January 2015; the FDA has an accepted BLA for ch14.18 from June 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, United Therapeutics kept $0.26.
- Revenue$1.29B100.0%
- Cost of revenue−$134.8M10.5%
- Gross profit$1.15B89.5%
- Operating costs−$614.9M47.7%
- Operating income$538.8M41.8%
- Interest, other & tax−$198.7M15.4%
- Net income$340.1M26.4%
Where FY2014 revenue went
$1.29B- SG&A: $381.3M, 30% of revenue
- Net income: $340.1M, 26% of revenue
- R&D: $242.5M, 19% of revenue
- Interest, other & tax: $198.7M, 15% of revenue
- Cost of revenue: $125.9M, 9.8% of revenue
Kept 26% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 24, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $1.29B$1.12B | +15.4% |
| Cost of Revenue | $125.90M$131.13M | −4.0% |
| Gross Profit | $1.15B$975.82M | +18.2% |
| R&D Expenses | $242.50M$299.35M | −19.0% |
| SG&A Expenses | $381.30M$394.01M | −3.2% |
| Operating Expenses | $749.70M$824.49M | −9.1% |
| Operating Income | $538.80M$292.50M | +84.2% |
| Interest Expense | $17.60M$18.06M | −2.5% |
| Net Income | $340.10M$174.56M | +94.8% |
| EPS (Basic) | $7.06$3.49 | +102.3% |
| EPS (Diluted) | $6.28$3.28 | +91.5% |
| Shares Outstanding (Basic) | 48.20M50.08M | −3.7% |
| Shares Outstanding (Diluted) | 54.20M53.23M | +1.8% |
05—Questions
Frequently Asked Questions
Why did operating income increase so sharply in 2014?
Operating income rose to $538.8 million from $292.5 million mainly because share-based compensation expense declined to $190.1 million from $320.8 million, reflecting a smaller increase in the company's stock price during 2014 (about 15%) than in 2013 (about 120%). Revenue growth of 15.4% also contributed.
How concentrated is the company's revenue?
Sales of Remodulin, Tyvaso and Adcirca comprise substantially all revenues, and the company states it is substantially reliant on these products for the next several years. In 2014, sales to Accredo Health Group, Inc. accounted for 58% of total consolidated net revenues.
What are the main risks to Remodulin revenue?
Remodulin faces potential generic competition from Sandoz and Teva, whose ANDAs challenge several Remodulin patents. The company states that if an ANDA filer receives approval or prevails in litigation, revenue would decrease. The Orange Book patent expiring October 2017 has been upheld against Sandoz in district court, but Sandoz has appealed.
What is the status of the Convertible Notes and related obligations?
The 1.0% Convertible Senior Notes due September 2016 had $138.8 million of principal outstanding at December 31, 2014, and were classified as a current liability because the contingent conversion criteria were met. The company has settled early conversions and expects to pay the remaining principal in cash upon settlement or maturity, and it reports sufficient resources to do so.
06—Continue