United Therapeutics Corporation — FY 2023 Form 10-K
Reporting period: Year ended December 31, 2023; filed February 21, 2024. This is an annual filing, not a standalone fourth-quarter report, and the supplied filing text does not provide a clear set of Q4-only financial results.
Business context
United Therapeutics is a Delaware public benefit corporation focused on therapies for pulmonary arterial hypertension (PAH) and other serious diseases, alongside research into manufactured organs and transplantation technologies. Its commercial portfolio includes treprostinil products Tyvaso DPI, nebulized Tyvaso, Remodulin and Orenitram, plus Unituxin and Adcirca. Tyvaso DPI and nebulized Tyvaso are also approved in the U.S. for pulmonary hypertension associated with interstitial lung disease (PH-ILD).
Key financial metrics
| Metric (USD millions, except per-share data and ratios) | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $2,327.5 | $1,936.3 | +20% |
| Operating income | $1,184.9 | $979.7 | +21% |
| Net income | $984.8 | $727.3 | +35% |
| Diluted EPS | $19.81 | $15.00 | +32% |
| Net cash from operating activities | $978.0 | $802.5 | +22% |
| Cash and cash equivalents | $1,207.7 | $961.2 | +26% |
| Marketable investments, current and non-current | $3,696.2 | $3,193.7 | +16% |
| Debt outstanding | $700.0 | $800.0 | -$100.0 |
Margins: Cost of sales was $257.5 million, producing an approximate gross margin of 88.9%, versus 92.2% in 2022. Operating margin was approximately 50.9% (50.6% in 2022); net margin was approximately 42.3% (37.6% in 2022). These ratios are calculated from reported figures.
Liquidity: Cash and marketable investments totaled $4.90 billion at year-end. Current assets were $3.55 billion and current liabilities $804.4 million. The company reported $978.0 million of operating cash flow and spent $230.4 million on property, plant and equipment. A 100-basis-point increase in the variable rate on outstanding debt would increase annual interest expense by about $7 million, according to the filing.
Revenue mix and changes versus prior year
- Tyvaso DPI: $731.1 million, up from $158.3 million in 2022, following its June 2022 launch.
- Total Tyvaso: $1,233.7 million, up 41%; 53% of total revenue. DPI growth and increased PH-ILD use were partly offset by lower nebulized Tyvaso sales in the U.S. as patients shifted to DPI.
- Remodulin: $494.8 million, down 1%, reflecting lower international sales partly offset by U.S. growth.
- Orenitram: $359.4 million, up 11%, attributed to higher price and volume.
- Unituxin: $198.9 million, up 9%, primarily from a price increase.
- Adcirca: $28.9 million, down 30%, amid ongoing generic competition.
Operating expenses rose to $1,142.6 million from $956.6 million. R&D increased 26% to $408.0 million, including $46.0 million of acquired in-process R&D expense for IVIVA and increased TETON and organ-manufacturing spending. Cost of sales rose 70%, principally due to Tyvaso DPI royalties and product costs. SG&A decreased 1% to $477.1 million, in part because share-based compensation fell sharply. Total share-based compensation was $39.1 million versus $106.8 million; the 2023 amount included a $30.7 million STAP compensation benefit, primarily reflecting the decline in the company’s share price.
Interest income rose to $162.7 million from $45.2 million, while interest expense increased to $59.3 million from $32.4 million. Income tax expense was $289.5 million and the effective tax rate was approximately 23%, similar to 2022.
Outlook, material developments and risks
- Management expects near-term revenue growth primarily from Tyvaso DPI and nebulized Tyvaso, continued Orenitram growth, and modest price increases. The filing provides no specific numerical revenue or earnings guidance.
- The company budgeted approximately $500 million of capital expenditures for 2024–2026, mostly for a new Tyvaso DPI manufacturing facility, funded from cash on hand. Commercial-scale facilities for xenotransplantation could materially increase future spending.
- R&D priorities include Phase 3 TETON trials of nebulized Tyvaso for idiopathic pulmonary fibrosis and progressive pulmonary fibrosis, and the Phase 3 ADVANCE OUTCOMES trial of ralinepag for PAH. The company discontinued ADVANCE CAPACITY due to slow enrollment and redirected resources; it also terminated the RemoPro program.
- In late 2023, the company acquired IVIVA and Miromatrix to expand manufactured-kidney and liver programs. Miromatrix’s potential contingent payment is approximately $54 million if a specified first human kidney implantation milestone is achieved by the end of 2025. In January 2024, the FDA cleared the IND for Miromatrix’s miroliver ELAP; the company planned to begin a Phase 1 study in 2024.
- Competition and patents: Generic Remodulin competition is established; settlements permit potential generic nebulized Tyvaso entry from January 2026 and Orenitram entry from 2027, subject to earlier-entry conditions. Liquidia’s Yutrepia approval and label expansion remain central competitive and legal uncertainties. The court judgment barred approval for PAH until May 2027, but a motion to modify the judgment was pending; litigation over a PH-ILD indication and the FDA’s review process was also ongoing as of the filing.
- Other litigation and contingencies: A Sandoz contract claim remained for a damages trial scheduled to begin April 29, 2024; the company said it could not reasonably estimate potential losses. Humana, UnitedHealthcare and MSP Recovery-related lawsuits concerning charitable patient-assistance donations were pending. Appeals concerning the company’s 340B contract-pharmacy policy were also pending. The filing notes a prior $210 million U.S. government settlement in 2017 and a related five-year Corporate Integrity Agreement that ended in 2022.
- Pricing, supply and concentration risks: The Inflation Reduction Act, Medicaid rebate changes and payer pressure may affect net pricing and reimbursement. Tyvaso DPI manufacturing depends entirely on MannKind at present; Remodulin delivery also relies on external pump suppliers. Three U.S. distributors represented 93% of 2023 revenue, including two at 51% and 34% individually.
- Management stated current liquidity is sufficient for planned operations, while acknowledging that cash-flow projections are uncertain. Of $700 million outstanding under the revolving credit agreement, $400 million was classified as current because management intended to repay it within one year; the facility matures in 2028. The company reported compliance with debt covenants.
Most important facts for investors to verify
- Whether Tyvaso DPI’s growth and the broader Tyvaso franchise can continue to offset declining nebulized Tyvaso U.S. sales, and whether manufacturing capacity meets demand.
- Progress and results from TETON and ADVANCE OUTCOMES, including trial timing, enrollment and regulatory outcomes; these programs remain uncertain.
- Developments in Liquidia/Yutrepia proceedings, Sandoz damages litigation, patient-assistance lawsuits and 340B litigation, including any changes to potential launch timing or financial exposure.
- Actual 2024–2026 capital spending, debt repayment and liquidity after planned investment in facilities and acquired organ-manufacturing programs.
- Changes in product-level net pricing, rebate liabilities and payer access. Year-end accrued rebates and chargebacks were $108.4 million; rebate estimation was identified as a critical audit matter.
Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective as of December 31, 2023.