Business context and reporting period
United Therapeutics Corporation is a biotechnology company focused on therapies for chronic and life-threatening conditions, with its principal commercial products targeting pulmonary arterial hypertension and related conditions. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021; comparisons are with the corresponding 2020 periods. Amounts are in millions of dollars except per-share data.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $446.5 | $362.0 | $825.6 | $718.3 |
| Gross profit | $409.3 | $336.1 | $765.4 | $669.0 |
| Operating income | $222.2 | $140.5 | $157.4 | $307.2 |
| Net income | $172.6 | $107.1 | $200.9 | $244.8 |
| Diluted EPS | $3.65 | $2.41 | $4.28 | $5.53 |
- Q2 gross, operating, and net margins were approximately 91.7%, 49.8%, and 38.6%, respectively. Six-month margins were approximately 92.7%, 19.1%, and 24.3%.
- Q2 revenue increased 23%; six-month revenue increased 15%. Q2 growth was led by Tyvaso (+29%) and Unituxin (+83%). Six-month growth was led by Tyvaso (+25%) and Unituxin (+74%).
- Cash and cash equivalents were $942.2 at June 30, 2021, versus $738.7 at year-end 2020. Current and non-current marketable investments totaled $2,350.7; cash and investments together were $3,292.9.
- Six-month operating cash flow was $238.0, down from $378.6. Investing cash outflow was $55.2, compared with $403.0; financing cash inflow was $20.7, versus a $28.6 outflow. Ending cash increased by $203.5.
- Debt was $800.0 under an unsecured revolving credit agreement, classified as non-current and maturing in December 2025. The facility provides up to $1.5 billion; the company reported covenant compliance.
Material changes versus the prior comparable period
- Q2 operating income rose to $222.2 from $140.5, while six-month operating income fell to $157.4 from $307.2. Six-month R&D expense rose to $378.0 from $162.9, principally reflecting a $107.3 Trevyent in-process R&D impairment, a $105.0 priority review voucher purchase, and a $11.6 facility impairment.
- Six-month net income declined despite higher sales. Other income included a $91.9 realized gain on sale of a publicly traded equity investment; this helped offset the operating-income decline.
- Tyvaso sales benefited from its March 2021 label expansion to pulmonary hypertension associated with interstitial lung disease (PH-ILD). The company reported minimal U.S. Remodulin sales erosion from generic competition to date, but international generic competition continued to pressure Remodulin.
- Six-month operating cash flow was lower, partly due to the voucher purchase, higher income-tax payments, and higher cash settlements of share-tracking awards. Cash paid for income taxes was $85.4, versus $44.0.
Outlook, commentary, risks, and unusual items
- Management anticipated continued revenue growth in the second half of 2021 versus 2020, driven mainly by Tyvaso’s PH-ILD indication, continued Orenitram growth, and modest price increases; further generic erosion in Adcirca could partly offset growth. No specific revenue or earnings guidance amount was provided.
- Tyvaso DPI’s NDA was accepted for priority review, with FDA action anticipated in October 2021. Approval depended in part on inspection of MannKind’s manufacturing facility; the FDA inspection was ongoing at filing.
- The company discontinued U.S. Trevyent development after FDA feedback indicated product redesign and a clinical study would be needed. It also discontinued biomechanical-lung R&D, and United Therapeutics and Medtronic ended further development and commercialization efforts for the implantable Remodulin system.
- Material legal and regulatory matters include patent disputes with Liquidia and ANI, antitrust litigation brought by Sandoz and Liquidia PAH, a class-action matter involving patient-assistance donations, and the company’s challenge to HRSA’s position on 340B contract-pharmacy policies. The company said it could not reasonably estimate potential losses in the Sandoz matter; outcomes and potential financial effects of these disputes were uncertain.
- Key risks include generic and branded competition, patent challenges, payer pricing and reimbursement pressure, dependence on a small number of distributors and third-party manufacturers, regulatory and clinical-trial uncertainty, COVID-19 disruption, and the 340B dispute. The company noted that its three largest U.S. distributors represented 88% of Q2 revenue.
- Other unusual items include $17.0 of PP&E impairment charges and $2.3 of impairment charges on privately held investments during the first half. Six-month R&D and net income therefore reflect substantial one-time or non-recurring effects.
Important facts for investors to verify
- Whether Tyvaso DPI receives FDA approval on the anticipated schedule and whether the manufacturing inspection raises issues.
- Whether Tyvaso’s PH-ILD label expansion sustains sales growth, and how generic competition affects Remodulin, Adcirca, and future Tyvaso and Orenitram sales.
- How much reported earnings and cash flow are affected by the voucher purchase, asset impairments, investment gains, and share-tracking award settlements.
- Developments and potential exposure in the Liquidia, ANI, Sandoz/Liquidia PAH, and 340B matters; the filing does not provide a clear quantified loss estimate for several proceedings.
- Distributor and third-party manufacturing concentration, along with liquidity and covenant headroom under the $800.0 debt balance and revolving facility.