United Therapeutics Corporation — Q1 2021 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2021, compared with Q1 2020. United Therapeutics is a biotechnology company whose principal products address pulmonary arterial hypertension and related conditions. Its marketed products are Remodulin, Tyvaso, Orenitram, Unituxin, and Adcirca.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $379.1 million | $356.3 million; up 6% |
| Gross profit / gross margin | $356.1 million / 93.9% | $332.9 million / 93.4% |
| Operating income (loss) | $(64.8) million; (17.1%) margin | $166.7 million; 46.8% margin |
| Net income / diluted EPS | $28.3 million / $0.61 | $137.7 million / $3.12 |
| Operating cash flow | $89.8 million | $214.6 million |
| Cash and cash equivalents | $832.3 million | $738.7 million at Dec. 31, 2020 |
| Marketable investments | $2,332.5 million | $2,245.9 million at Dec. 31, 2020 |
| Debt | $800.0 million; non-current | Unchanged from Dec. 31, 2020 |
Cash, cash equivalents, and marketable investments totaled $3.165 billion at quarter-end. Current assets were $2.014 billion and current liabilities $302.4 million. The $800 million revolving-credit borrowing matures in December 2025; the company reported covenant compliance. Net cash increased $93.6 million to $832.3 million.
Material changes and unusual items
- Revenue rose 6%, but product trends differed: Tyvaso increased 20% to $123.0 million; Unituxin increased 65% to $43.9 million; Orenitram increased 5% to $72.4 million. Remodulin fell 10% to $130.2 million, and Adcirca fell 23% to $9.6 million.
- Research and development expense surged to $303.7 million from $73.2 million, including a $107.3 million Trevyent in-process R&D impairment, a $105.0 million priority review voucher purchase, $11.6 million of facility impairment, and $6.1 million for discontinued biomechanical-lung work. Trevyent U.S. development and biomechanical-lung research were discontinued.
- Other income included a $91.9 million realized gain on sale of a publicly traded investment. This and the large R&D charges materially affected reported earnings; net income fell despite higher revenue.
- SG&A increased 26% to $117.2 million, including higher litigation costs and share-based compensation. Total share-based compensation rose to $40.1 million from $30.8 million, in part due to higher stock-price-related STAP expense.
- Operating cash flow declined 58%, primarily reflecting the $105.0 million voucher purchase and higher STAP settlement payments. Investing cash flow was $(6.3) million; financing cash flow was $10.1 million.
Outlook, commentary, and risks
- Management anticipated 2021 revenue growth versus 2020, driven mainly by Tyvaso’s expanded PH-ILD indication, continued Orenitram growth, and modest price increases, partly offset by generic erosion of Adcirca. This is management’s expectation, not quantified earnings guidance.
- FDA approved Tyvaso for pulmonary hypertension associated with interstitial lung disease on March 31, 2021. The company filed the Tyvaso DPI NDA in April 2021 and expected FDA action in December 2021 if accepted for review, using a priority review voucher. Timing and approval remain uncertain.
- The Implantable System for Remodulin had FDA approval, but Medtronic still needed to satisfy FDA conditions; the company did not expect a 2021 launch based on FDA feedback. Remunity Pump U.S. sales began in February 2021.
- COVID-19 continued to create uncertainty for near-term revenue and development plans, although management reported no material change in its overall impact since the 2020 annual report.
- Key competitive and legal exposures include generic competition, Liquidia’s LIQ861 patent and regulatory matters, ANI’s Orenitram ANDA litigation, and the Sandoz/RareGen antitrust suit. The company said it could not reasonably estimate potential losses in the antitrust case. Adcirca returns may rise as older inventory expires; the recorded returns allowance was $12.3 million.
- Three U.S. distributors accounted for 54%, 26%, and 11% of revenue, respectively. U.S. treprostinil revenue depends on two specialty distributors, creating ordering and concentration exposure. Other risks include pricing and reimbursement pressure, supply-chain and third-party manufacturer dependence, patent outcomes, clinical and regulatory setbacks, and investment volatility.
Investor verification priorities
- Separate recurring operating performance from the $105.0 million voucher purchase, impairment charges, and $91.9 million investment-sale gain.
- Track Tyvaso PH-ILD uptake and Tyvaso DPI FDA review, approval, and launch timing.
- Monitor Remodulin sales, generic competition, international pricing pressure, and the timing of potential Orenitram generic entry.
- Review operating cash generation, STAP-related cash settlements, and the company’s substantial investment portfolio relative to its $800 million debt.
- Follow the Liquidia, ANI, and Sandoz/RareGen proceedings and assess any resulting financial or commercial effects.