United Therapeutics Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. United Therapeutics is a Delaware public benefit corporation developing and commercializing therapies for chronic and life-threatening conditions, alongside technologies intended to expand the supply of transplantable organs. Figures are in U.S. dollars; financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Total revenue | $461.9 million | $379.1 million | Up 22% |
| Net product sales | $451.9 million | $379.1 million | Up 19% |
| Gross profit on product sales | $426.0 million | $356.1 million | Gross margin: 94.3% vs. 93.9% |
| Operating income (loss) | $288.0 million | $(64.8) million | Operating margin: 62.3% vs. (17.1%) |
| Net income | $239.9 million | $28.3 million | Diluted EPS: $5.03 vs. $0.61 |
| Net cash from operating activities | $288.7 million | $89.8 million | Up $198.9 million |
| Cash and cash equivalents | $813.3 million | $894.8 million at Dec. 31, 2021 | Period-end balance |
| Cash and marketable investments | $3,826.8 million | $3,580.6 million at Dec. 31, 2021 | Up 7% |
| Debt outstanding | $800.0 million | $800.0 million at Dec. 31, 2021 | Non-current; refinanced under new credit agreement |
Current assets were $2,586.6 million and current liabilities were $292.6 million at March 31, 2022. The company reported $3.8 billion in cash and marketable investments against $800.0 million of debt. Cash and cash equivalents declined by $81.5 million during the quarter, principally reflecting net purchases of investments and other cash uses.
Material changes and drivers
- Product sales: Tyvaso increased 40% to $172.0 million, primarily on higher quantities following its PH-ILD label expansion. Orenitram rose 14% to $82.8 million, reflecting higher volume and, to a lesser extent, price. Unituxin increased 27% to $55.6 million, primarily following its Japan launch. Remodulin was up 1% to $131.7 million; international growth was partly offset by lower U.S. sales. Adcirca was up 2% to $9.8 million.
- Other revenue: The company recognized $10.0 million from an upfront payment by an international distributor; there was no comparable amount in Q1 2021.
- Operating expenses: R&D fell to $69.0 million from $303.7 million. The prior-year quarter included a $107.3 million Trevyent in-process R&D impairment, a $105.0 million priority review voucher purchase, and facility-related impairment charges. SG&A declined to $79.0 million from $117.2 million, largely because of a $33.4 million STAP compensation benefit in 2022 versus $25.7 million of STAP expense in 2021; the benefit reflected a decline in the company’s share price.
- Other income: Total other income was $20.7 million versus $97.3 million in Q1 2021. The prior-year period included a $91.9 million gain from the sale of a publicly traded investment.
- Investments and comprehensive income: Available-for-sale debt securities had $48.7 million of gross unrealized losses at March 31, 2022, which the company attributed to the interest-rate environment rather than credit losses. Comprehensive income was $208.6 million, below net income due mainly to these securities’ unrealized losses.
Outlook, commentary, and risks
- Management expects near-term revenue growth to be driven primarily by Tyvaso, Orenitram, a potential Tyvaso DPI launch, and modest price increases, partly offset by further generic erosion of Adcirca. No numeric revenue or earnings guidance is provided.
- Tyvaso DPI’s resubmitted NDA was pending FDA review, with a decision anticipated in May 2022. The FDA’s February request for additional pulmonary-safety information extended the review timeline. Approval and launch remained uncertain.
- Development priorities include phase 3 programs for Tyvaso in PH-COPD and idiopathic pulmonary fibrosis, phase 3 ralinepag studies, and early-stage RemoPro and organ-manufacturing programs. These programs carry clinical, regulatory, and execution risks.
- Competition and intellectual-property matters could affect the treprostinil franchise. Liquidia’s Yutrepia had tentative FDA approval, with patent litigation and related proceedings ongoing; the company also faced an Orenitram generic challenge from ANI. In the Sandoz matter, most claims had been resolved in United Therapeutics’ favor, but a breach-of-contract damages issue remained for trial.
- The company’s 340B contract-pharmacy litigation had produced a favorable district-court ruling, but the government’s appeal was pending. A different outcome could lead to enforcement exposure or affect pricing and revenue.
- Revenue is concentrated among a small number of distributors: three U.S. distributors represented 47%, 29%, and 10% of total revenue, respectively, in Q1 2022. Management noted that distributor order timing can cause sales to differ from underlying patient demand.
- Other cited risks include reliance on third-party manufacturers and suppliers, generic competition, reimbursement and pricing pressure, clinical and regulatory uncertainty, COVID-19-related disruption, and ongoing litigation. The company stated it had sufficient liquidity for ongoing operations and business plans, while noting cash-flow projections are uncertain.
Key facts for investors to verify
- Whether Tyvaso DPI received FDA approval, and the timing and commercial impact of any launch.
- Whether Tyvaso’s PH-ILD-driven growth and Orenitram and Unituxin sales gains continue, and whether Remodulin trends reflect patient demand or distributor order timing.
- How much reported earnings depend on volatile STAP remeasurement benefits, investment gains or losses, and other non-recurring items.
- Developments in Liquidia/Yutrepia, ANI/Orenitram, Sandoz, and 340B proceedings, including potential effects on exclusivity, sales, and liabilities.
- Changes in the $800.0 million revolving-credit balance, investment portfolio value, and cash generation.
- Whether distributor concentration, third-party supply arrangements, and reimbursement pressures materially affect product access or revenue.