01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
United Therapeutics Corporation (Nasdaq: UTHR) reported net product sales of $1.45 billiona for 2019, down from $1.63 billion in 2018, as the company recorded a net loss of $104.5 million, compared with net income of $589.2 million in 2018.
The decline was driven mainly by generic competition for Adcirca, whose net product sales fell to $107.2 millionb from $323.7 million. The loss was driven by an $800.0 million upfront payment to Arena Pharmaceuticals for the ralinepag license, which was expensed as acquired in-process research and development. Remodulin net product sales were $587.0 million, Tyvaso $415.6 million, Orenitram $225.3 million and Unituxin $113.7 million.
Management anticipates revenue growth in 2020 compared with 2019, driven by treprostinil-based product growth and modest price increases, partly offset by Adcirca erosion and European generic launches. The pipeline is central to the outlook. The company said the INCREASE phase III study of Tyvaso in WHO Group 3 pulmonary hypertension associated with interstitial lung disease met its primary endpoint, with a 21-meter improvement in 6MWD versus placebo, and it expects to submit an efficacy supplement by mid-2020.
The Trevyent NDA has a PDUFA date of April 27, 2020, but the company said the date could be extended or that it may receive a complete response letter. The Implantable System for Remodulin launch has been delayed to 2021, and the DISTINCT study of Unituxin in small cell lung cancer failed its primary endpoint. The Remunity system received FDA 510(k) clearance for pharmacy-fill and the company plans to launch it by July 2020.
Balance sheet and liquidity remain solid. Cash, cash equivalents and marketable investments totaled $2.25 billionc at December 31, 2019, against $850.0 million outstanding under the 2018 Credit Agreement.
The company repurchased no shares in 2019 and has never paid cash dividends. The company also disclosed that the Adcirca license with Eli Lilly expires December 31, 2020, after which Adcirca sales will end unless the agreement is extended.
02—Key points
Key Highlights
- Total revenues were $1,448.8 million in 2019, down 11 percent from $1,627.8 million in 2018, primarily due to Adcirca generic erosion (Adcirca sales fell to $107.2 million from $323.7 million).
- Net loss of $104.5 million (loss per diluted share of $2.39) in 2019, versus net income of $589.2 million in 2018, reflecting the $800.0 million Arena ralinepag upfront payment expensed as acquired in-process R&D.
- Remodulin ($587.0 million), Tyvaso ($415.6 million), and Orenitram ($225.3 million) together grew net revenues from treprostinil-based products by $8.6 million in 2019; Orenitram's FDA label now includes delaying disease progression based on FREEDOM-EV results.
- INCREASE phase III study of Tyvaso in PH-ILD met its primary endpoint (21-meter 6MWD improvement versus placebo); supplemental NDA expected by mid-year 2020.
- Trevyent NDA has an April 27, 2020 PDUFA date, but the company said that date could be extended or that a complete response letter could be received; the Implantable System for Remodulin launch is now expected in 2021.
- Cash, cash equivalents and marketable investments totaled $2,253.4 million at year-end 2019; $850.0 million was outstanding under the 2018 Credit Agreement.
- Adcirca license with Eli Lilly expires December 31, 2020, after which Adcirca sales will cease unless the agreement is extended.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, United Therapeutics lost $0.07.
- Revenue$1.45B100.0%
- Cost of revenue−$117.6M8.1%
- Gross profit$1.33B91.9%
- Operating costs−$1.52B104.8%
- Operating income−$187.6M12.9%
- Interest, other & tax$83.1M5.7%
- Net income−$104.5M7.2%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.45B$1.63B | −11.0% |
| Cost of Revenue | $117.60M$198.70M | −40.8% |
| Gross Profit | $1.33B$1.43B | −6.9% |
| R&D Expenses | $1.18B$357.90M | +230.4% |
| Operating Expenses | $1.64B$822.40M | +99.0% |
| Operating Income | -$187.60M$805.40M | −123.3% |
| Interest Expense | $44.20M$13.90M | +218.0% |
| Net Income | -$104.50M$589.20M | −117.7% |
| EPS (Basic) | $-2.39$13.54 | −117.7% |
| EPS (Diluted) | $-2.39$13.39 | −117.8% |
| Shares Outstanding (Basic) | 43.80M43.50M | +0.7% |
| Shares Outstanding (Diluted) | 43.80M44.00M | −0.5% |
05—Questions
Frequently Asked Questions
Why did UTHR swing from net income to a net loss in 2019?
The company paid $800.0 million to Arena Pharmaceuticals for the exclusive ralinepag license in January 2019. Because the company determined it did not acquire a business, the payment was expensed as acquired in-process research and development within R&D expenses. Operating loss was $187.6 million, and net loss was $104.5 million, compared with net income of $589.2 million in 2018.
What is driving the revenue decline, and what does management expect for 2020?
Total revenues fell $179.0 million, primarily because Adcirca sales dropped after generic competition began in August 2018. Management anticipates 2020 revenue growth over 2019, driven by growth in treprostinil-based product patients, Orenitram growth following its label expansion, and modest price increases, partly offset by further Adcirca erosion and additional generic launches in Europe.
What are the key regulatory catalysts for the next year?
The Trevyent NDA has an April 27, 2020 PDUFA date, though the company said the date could be extended or a complete response letter received. The company plans to submit the INCREASE results for Tyvaso in WHO Group 3 PH-ILD as a supplement by mid-2020. The Remunity pharmacy-fill system received FDA 510(k) clearance, with a launch planned by July 2020. The Implantable System for Remodulin launch has been delayed to 2021 due to Medtronic's remaining PMA conditions.
How exposed is the company to generic competition?
Generic versions of Adcirca have launched in the U.S., and Adcirca net product sales declined significantly. Generic Remodulin has launched in the U.S. since March 2019 and in certain European countries, though the company said it had seen minimal erosion of U.S. Remodulin sales through December 31, 2019. Under settlements, generic Tyvaso and Orenitram may enter the U.S. market as early as January 2026 and June 2027, respectively.
Does the company pay dividends or repurchase shares?
No. The company has never paid cash dividends and does not intend to do so in the foreseeable future, and its 2018 Credit Agreement contains covenants that may restrict dividends. The company did not repurchase any equity securities during 2019.
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