United Therapeutics Corporation (UTHR) — FY 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; it does not provide standalone fourth-quarter results. The company develops and sells therapies primarily for pulmonary arterial hypertension (PAH), and is also developing organ-transplant technologies.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $1.483 billion | $1.449 billion |
| Gross profit / margin | $1.375 billion / 92.7% | $1.331 billion / 91.9% |
| Operating income (loss) | $593.6 million | $(187.6) million |
| Net income (loss) | $514.8 million | $(104.5) million |
| Diluted EPS | $11.54 | $(2.39) |
| Cash from operating activities | $755.7 million | $(206.6) million |
- Revenue increased 2.4%. Tyvaso sales rose 16% to $483.3 million and Orenitram rose 30% to $293.1 million. Remodulin fell 12% to $516.7 million; Unituxin rose 8% to $122.9 million; Adcirca fell 37% to $67.3 million.
- Remodulin, Tyvaso, and Orenitram together generated about 87% of revenue. The two largest U.S. distributors represented 55% and 28% of total revenue, respectively.
- Operating expenses were $889.7 million, down from $1.636 billion. The prior-year figure included an $800 million up-front ralinepag license payment. 2020 SG&A increased 26% to $423.9 million, including higher share-based compensation.
- Cash and cash equivalents plus marketable investments totaled $2.985 billion at year-end. Current assets were $2.167 billion versus current liabilities of $323.3 million.
- Debt was $800 million under a $1.5 billion unsecured revolving facility due December 2025; the company reported compliance with its covenants. Cash and investments exceeded debt by about $2.185 billion.
- Investing cash outflow was $738.5 million, largely reflecting purchases and maturities of marketable investments; capital expenditures were $59.3 million.
Material changes and unusual items
- 2020 returned to profitability after the 2019 loss, principally because 2019 included the $800 million ralinepag payment expensed as R&D. 2020 R&D was $357.7 million, down 70% from 2019.
- Adcirca continued to lose sales following generic launches. Remodulin declined amid generic pressure internationally and COVID-related reductions in new patient starts; U.S. starts recovered to pre-pandemic levels by the second half of 2020.
- Share-based compensation expense increased to $163.8 million from $45.4 million, mainly because the stock-price-linked STAP liability rose as the share price increased. The company recorded $49.3 million of other income, including investment gains, and $9.1 million of impairments of investments in privately held companies.
- The auditor issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting.
Outlook, risks, and contingencies
- Management anticipated 2021 revenue growth, primarily from potential Tyvaso label expansion for pulmonary hypertension associated with interstitial lung disease (PH-ILD), continued Orenitram growth, and modest price increases, partly offset by further generic erosion in Adcirca. No specific revenue or earnings guidance was provided.
- The Tyvaso PH-ILD supplemental application was under FDA review, with a decision expected in April 2021. The company planned to submit a Tyvaso DPI application in 2021. Timing and commercialization remain subject to regulatory review and execution.
- Key development risks include Trevyent’s FDA response letter and anticipated delay of resubmission to 2022; Medtronic’s remaining requirements before launch of the implantable Remodulin system; clinical-trial and supply disruptions from COVID-19; and reliance on third-party manufacturers, including MannKind for Tyvaso DPI.
- Generic competition, patent challenges and pricing/reimbursement pressure could affect sales. Liquidia is litigating over treprostinil patents and challenging patents before the PTAB. Potential U.S. generic entry dates under settlements are January 2026 for Tyvaso and June 2027 for Orenitram, subject to possible earlier entry under specified circumstances.
- Adcirca returns are a notable exposure: the year-end product-return allowance was $12.5 million, and management expected increased returns beginning in 2021 as inventory expires.
- Reported legal matters include Sandoz/RareGen antitrust litigation and a putative class action alleging improper coordination of patient-assistance donations. The company said it intends to defend these matters; it could not reasonably estimate potential losses for the Sandoz/RareGen case.
- The company previously paid $210 million to settle a 2017 U.S. government investigation concerning patient-assistance support and entered a five-year Corporate Integrity Agreement.
Investor verification checklist
- Confirm the drivers and sustainability of revenue growth by product, particularly Tyvaso and Orenitram, and the continuing declines in Remodulin and Adcirca.
- Track FDA decisions, trial results, and launch timing for Tyvaso PH-ILD, Tyvaso DPI, the implantable Remodulin system, and Trevyent.
- Review gross-to-net deductions, Adcirca return estimates, and distributor inventory/order patterns.
- Monitor generic competition, Liquidia patent proceedings, and the Sandoz/RareGen and patient-assistance litigation.
- Assess the quality of investment-related income, volatility in share-based compensation, and the company’s substantial third-party manufacturing dependencies.