United Therapeutics Corporation — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited consolidated results; comparisons are with the corresponding 2021 periods. Amounts are in millions, except per-share data.
Business context
United Therapeutics is a biotechnology company focused on therapies for chronic and life-threatening conditions and technologies to expand transplantable-organ availability. Its marketed products include Tyvaso, Tyvaso DPI, Remodulin, Orenitram, Unituxin, and Adcirca. The company operates as one reportable segment.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $466.9 | $446.5 | $928.8 | $825.6 |
| Operating income | $201.8 | $222.2 | $489.8 | $157.4 |
| Net income | $116.0 | $172.6 | $355.9 | $200.9 |
| Diluted EPS | $2.41 | $3.65 | $7.43 | $4.28 |
| Operating cash flow | Not presented quarterly | Not presented quarterly | $415.7 | $238.0 |
| Capital expenditures | Not presented quarterly | Not presented quarterly | $30.5 | $26.9 |
Q2 revenue grew 5%; six-month revenue grew 13%. Product gross margin was approximately 93.6% in Q2 2022 versus 91.7% in Q2 2021, and approximately 94.0% for the first half versus 92.7%. Operating margin was approximately 43.2% in Q2 versus 49.8%; for the first half it was 52.7% versus 19.1%. Net margin was approximately 24.8% in Q2 versus 38.7%.
At June 30, cash and cash equivalents were $795.2 and marketable investments totaled $3,101.9, for combined liquidity of $3,897.1. The company had $800.0 of non-current borrowings under its unsecured revolving credit agreement, leaving combined cash and investments net of that debt of approximately $3,097.1. Current assets were $2,684.3 and current liabilities were $331.5. The credit agreement provides revolving facilities of up to $2.0 billion and matures in 2027; borrowings bear variable-rate interest. The company reported covenant compliance.
Material changes and notable items
- Product sales: Q2 Tyvaso sales increased 31% to $201.0, while Remodulin declined 6% to $132.0, Orenitram rose 4% to $79.0, Unituxin declined 16% to $44.5, and Adcirca fell 56% to $10.4. Tyvaso growth was attributed primarily to increased patient numbers following the PH-ILD label expansion. Adcirca continued to face generic competition.
- Tyvaso DPI: FDA approval for PAH and PH-ILD was received in May 2022; commercial shipments to distributors began in June. MannKind manufactures and supplies the product under a cost-plus agreement.
- Profit and investment volatility: Q2 net income fell despite revenue growth, in part as other expense was $51.8, primarily reflecting unrealized losses on equity securities. Q2 share-based compensation rose to $65.5 from $29.1, largely due to higher STAP award expense associated with the increase in the company’s share price. First-half 2021 R&D included major one-time expenses: a $107.3 Trevyent impairment, a $105.0 priority review voucher purchase, and $17.0 of property and equipment impairments; their absence materially affects the year-over-year comparison.
- Cash flow and investments: First-half operating cash flow increased to $415.7. Investing cash outflow was $528.2, primarily reflecting purchases and maturities of marketable investments. Available-for-sale securities had $63.9 of gross unrealized losses at June 30, which management attributed to interest rates rather than credit deterioration; the losses were recorded in accumulated other comprehensive loss.
Outlook, risks, and contingencies
Management expects near-term revenue growth to be driven mainly by Tyvaso, including the PH-ILD label expansion and Tyvaso DPI launch, continued Orenitram growth, and modest price increases, partly offset by further Adcirca generic erosion. The filing provides no specific numerical full-year revenue or earnings guidance. Longer-term development priorities include ralinepag, Tyvaso studies in PH-COPD and IPF, and organ-manufacturing programs. The PERFECT PH-COPD study was redesigned from 136 to 314 patients; TETON studies in IPF were ongoing.
- Competition and patents: Liquidia’s Yutrepia could compete with Tyvaso and Tyvaso DPI. The FDA’s 30-month stay on final approval was due to expire in October 2022, subject to litigation. In July 2022, the PTAB found all claims of the company’s ’793 patent unpatentable; the company could seek rehearing or appeal. Other district-court proceedings remained unresolved.
- Other litigation and regulation: Sandoz’s remaining contract claim was proceeding to a damages trial, with potential losses not reasonably estimable. In the 340B contract-pharmacy dispute, the company had prevailed at the district court, but the government’s appeal remained pending. A magistrate judge recommended dismissal without prejudice of the MSP Recovery case; further proceedings remained possible.
- Commercial and operating risks: The company relies on distributors and third-party manufacturers, including MannKind for Tyvaso DPI, DEKA for Remunity pumps, and Minnetronix for the Tyvaso inhalation system. Supply interruptions, reimbursement and pricing pressure, generic competition, clinical and regulatory outcomes, and COVID-19-related disruption could affect results.
- Other exposures: The company disclosed interest-rate and investment-market risks, uncertain tax positions, and risks arising from its Delaware public-benefit-corporation status. It stated that market risk had not materially changed since year-end 2021.
Important facts for investors to verify
- Tyvaso DPI launch uptake, patient demand, and contribution to Tyvaso-family sales.
- Progress and decisions in Liquidia patent proceedings, including the ’793 patent appeal options and timing of Yutrepia potential approval.
- Durability of Tyvaso growth and the trajectory of Remodulin, Orenitram, Unituxin, and generic-pressured Adcirca sales.
- How much reported earnings volatility reflects STAP remeasurement and equity-security fair-value changes versus underlying operations.
- Developments in the Sandoz damages trial, 340B appeal, and MSP Recovery litigation.
- Tyvaso DPI and pump supply continuity, and whether cash generation and liquidity remain adequate for operating plans and R&D commitments.