United Therapeutics(UTHR) - 2020 Q1 - Quarterly Report

Part I. Financial Information (Unaudited) Consolidated Financial Statements The consolidated financial statements present the company's financial position and operations, reporting a significant turnaround to net income in Q1 2020 Consolidated Balance Sheets The balance sheet reflects increased total assets and cash, alongside decreased liabilities primarily due to credit reclassification Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $875.2 | $738.4 | | Total current assets | $1,846.3 | $1,864.5 | | Total assets | $4,025.9 | $3,913.4 | | Liabilities & Equity | | | | Total current liabilities | $207.3 | $463.0 | | Line of credit (non-current) | $800.0 | $600.0 | | Total liabilities | $1,077.4 | $1,133.0 | | Total stockholders' equity | $2,948.5 | $2,780.4 | Consolidated Statements of Operations The statements of operations show a significant shift to net income in Q1 2020, primarily driven by a substantial decrease in R&D expenses compared to the prior year Consolidated Statements of Operations (in millions, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total revenues | $356.3 | $362.6 | | Research and development | $73.2 | $897.4 | | Total operating expenses | $189.6 | $1,018.5 | | Operating income (loss) | $166.7 | ($655.9) | | Net income (loss) | $137.7 | ($494.6) | | Diluted net income (loss) per share | $3.12 | ($11.32) | - The dramatic swing from a significant operating loss in Q1 2019 to operating income in Q1 2020 was driven by the $800.0 million upfront payment under the license agreement with Arena Pharmaceuticals, which was recorded as R&D expense in Q1 2019[68][82][166] Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2020 significantly improved to $148.4 million, primarily due to the shift from net loss to net income and unrealized gains Consolidated Statements of Comprehensive Income (in millions) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net income (loss) | $137.7 | ($494.6) | | Other comprehensive income, net of tax | $10.7 | $2.7 | | Comprehensive income (loss) | $148.4 | ($491.9) | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $2.95 billion as of March 31, 2020, driven by net income and share-based compensation Consolidated Statements of Cash Flows Net cash provided by operating activities was $214.6 million for Q1 2020, a significant improvement from the prior year's cash usage, primarily due to reduced R&D payments Consolidated Statements of Cash Flows Highlights (in millions) | Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $214.6 | ($627.4) | | Net cash used in investing activities | ($27.6) | ($60.3) | | Net cash (used in) provided by financing activities | ($50.2) | $809.1 | | Net increase in cash and cash equivalents | $136.8 | $121.4 | Notes to Consolidated Financial Statements The notes detail accounting policies, debt facilities, and ongoing litigation, including an antitrust suit from Sandoz and patent challenges from Liquidia Technologies - The company adopted new accounting standards for credit losses (ASU 2016-13) and goodwill impairment testing (ASU 2017-04) on January 1, 2020, with no material impact on the financial statements, apart from a minor adjustment to retained earnings[23][24] - As of March 31, 2020, the company had an $800.0 million outstanding balance on its unsecured revolving credit facility, which was reclassified entirely to a non-current liability due to uncertainty surrounding the COVID-19 pandemic[46] - The company is involved in litigation with Sandoz over alleged anticompetitive conduct related to Remodulin cartridges and is facing patent challenges from Liquidia Technologies regarding its Tyvaso patents[75][78][80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of COVID-19 on operations and clinical trials, a 2% revenue decline in Q1 2020, and the company's strong liquidity and R&D pipeline Impact of COVID-19 on our Business The company is closely monitoring the COVID-19 pandemic, which introduces significant uncertainty regarding near-term revenue and clinical trial timelines, leading to withdrawal of the 2020 revenue forecast - Due to the rapidly evolving situation and lack of visibility from the COVID-19 pandemic, the company is no longer able to predict whether its full-year 2020 net revenues will grow compared to 2019[84] - Most ongoing clinical studies have paused new patient enrollment, including trials for Tyvaso (PERFECT), ralinepag (ADVANCE), and Treprostinil Technosphere (BREEZE), which is expected to delay completion and data readouts[95] - In April 2020, the company observed a reduction in new patient prescriptions across all treprostinil-based products, believed to be due to patients' inability to visit physician offices[92][96] Results of Operations Total revenues for Q1 2020 decreased by 2% to $356.3 million, primarily due to generic competition, while operating expenses significantly decreased, leading to improved operating and net income Net Product Sales by Product (in millions) | Product | Q1 2020 | Q1 2019 | % Change | | :--- | :--- | :--- | :--- | | Remodulin | $145.3 | $155.5 | (7)% | | Tyvaso | $102.9 | $103.8 | (1)% | | Orenitram | $69.0 | $58.4 | 18% | | Unituxin | $26.6 | $24.9 | 7% | | Adcirca | $12.5 | $20.0 | (38)% | | Total revenues | $356.3 | $362.6 | (2)% | - R&D expenses decreased by $825.2 million compared to Q1 2019, primarily because the prior-year period included an $800.0 million upfront payment for the ralinepag license and a $12.5 million payment for the MannKind collaboration[166] - Cost of product sales decreased by $5.8 million, mainly due to a $3.3 million decrease in royalty expense for Adcirca as sales declined from generic competition[164] Research and Development The company's R&D efforts focus on near-term and medium-term pipeline programs, including the Remunity pump launch, Tyvaso sNDA submission, and advancing the Implantable System for Remodulin, despite a setback with the Trevyent NDA - The Phase III INCREASE study of Tyvaso in patients with pulmonary hypertension associated with interstitial lung disease (PH-ILD) met its primary endpoint, with a supplemental NDA submission planned by mid-2020[138][139] - In April 2020, the FDA issued a complete response letter (CRL) for the Trevyent new drug application, indicating that previously raised deficiencies have not been resolved[132] Key Near-Term Pipeline Programs (2020-2022) | Product | Indication | Status | | :--- | :--- | :--- | | Remunity (treprostinil) | PAH | Pharmacy-fill 510(k) cleared; Launch expected by July 2020 | | Tyvaso (treprostinil) | PH associated with IPF (WHO Group 3) | Phase III INCREASE study successful; sNDA submission planned mid-2020 | | Trevyent (treprostinil) | PAH | Evaluating FDA complete response letter to NDA | | Implantable System for Remodulin | PAH | U.S. launch pending satisfaction of regulatory requirements by Medtronic | Financial Condition, Liquidity, and Capital Resources The company maintains strong liquidity with $2.41 billion in cash and investments, and believes it can fund operations, despite reclassifying its $800.0 million credit facility to non-current due to COVID-19 uncertainty Liquidity Summary (in millions) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $875.2 | $738.4 | | Total cash, cash equivalents and marketable investments | $2,412.5 | $2,253.4 | - The company decided not to repay a portion of its credit facility within one year out of an abundance of caution given the uncertainty surrounding the COVID-19 pandemic, reclassifying the entire $800.0 million balance as a non-current liability[172] Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risk has not materially changed since December 31, 2019 - There have been no material changes in the company's market risk exposure since the end of the previous fiscal year[181] Controls and Procedures The company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective as of the end of the period[182] Part II. Other Information Legal Proceedings This section refers to Note 12 of the financial statements, detailing ongoing litigation, including an antitrust lawsuit from Sandoz and patent challenges from Liquidia Technologies - The company is engaged in an antitrust lawsuit with Sandoz Inc. and its partner, RareGen, LLC, concerning efforts to launch a generic version of Remodulin, with the court denying the plaintiffs' motion for a preliminary injunction[75] - Liquidia Technologies, Inc. has filed petitions to invalidate two of the company's patents related to treprostinil and has submitted an NDA for LIQ861, a potential competitor to Tyvaso[78][79][80] Risk Factors The company outlines numerous risks, including the significant new risk factor related to the COVID-19 pandemic, reliance on treprostinil-based products, increasing competition, and supply chain vulnerabilities - A new, significant risk factor details the potential adverse impacts of the COVID-19 pandemic on business operations, clinical trial timelines, and revenues due to social distancing, healthcare system strain, and economic downturn[212][213] - The company relies heavily on sales of Remodulin, Tyvaso, and Orenitram, which face increasing competition from generics (Remodulin, Adcirca) and new therapies like Liquidia's LIQ861, potentially impacting revenues[190][196] - The company is exposed to significant manufacturing and supply chain risks, including reliance on sole-source third parties for critical products and components, such as Medtronic for the Implantable System for Remodulin and MannKind for Treprostinil Technosphere[207][225][226] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2020, the company did not repurchase any outstanding equity securities or sell any unregistered equity securities - No unregistered sales of equity securities or share repurchases occurred during the first quarter of 2020[278] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and certifications