United Therapeutics(UTHR) - 2024 Q1 - Quarterly Report

Part I: Financial Information Item 1. Consolidated Financial Statements This section presents United Therapeutics Corporation's unaudited consolidated financial statements for Q1 2024 and 2023, detailing financial position, performance, and cash flows Consolidated Balance Sheets Total assets decreased to $6.50 billion and equity to $5.34 billion, primarily due to a $1.0 billion share repurchase Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,251.5 | $1,207.7 | | Total current assets | $3,248.7 | $3,551.0 | | Total assets | $6,495.2 | $7,167.0 | | Liabilities & Equity | | | | Total current liabilities | $860.6 | $804.4 | | Total liabilities | $1,157.1 | $1,182.2 | | Total stockholders' equity | $5,338.1 | $5,984.8 | | Total liabilities and stockholders' equity | $6,495.2 | $7,167.0 | Consolidated Statements of Operations Total revenues increased 34% to $677.7 million, with net income reaching $306.6 million or $6.17 per diluted share Q1 2024 vs Q1 2023 Statement of Operations (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $677.7 | $506.9 | | Total operating expenses | $321.4 | $222.5 | | Operating income | $356.3 | $284.4 | | Net income | $306.6 | $240.9 | | Diluted net income per share | $6.17 | $4.86 | Consolidated Statements of Cash Flows Operating cash flow was $376.5 million, investing activities generated $735.3 million, and financing used $1.07 billion for share repurchases Cash Flow Summary (in millions) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $376.5 | $374.8 | | Net cash provided by (used in) investing activities | $735.3 | $(221.1) | | Net cash (used in) provided by financing activities | $(1,068.0) | $48.6 | | Net increase in cash and cash equivalents | $43.8 | $202.3 | Notes to Consolidated Financial Statements Notes detail accounting policies, investments, debt, share-based compensation, the $1.0 billion share repurchase, segment revenues, litigation, and recent acquisitions - The company operates as a single operating segment focused on developing and commercializing products for chronic and life-threatening conditions[69] - In March 2024, the Board authorized a $1.0 billion share repurchase program, and the company entered into an accelerated share repurchase (ASR) agreement, receiving an initial delivery of 3,275,199 shares[65] - The effective tax rate for Q1 2024 was 23%, up from 17% in Q1 2023, primarily due to decreased excess tax benefits from share-based compensation[67] Revenues by Product (in millions) | Product | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Tyvaso DPI | $227.5 | $118.7 | | Nebulized Tyvaso | $145.0 | $119.7 | | Remodulin | $128.0 | $121.4 | | Orenitram | $106.2 | $88.2 | | Unituxin | $58.4 | $49.1 | | Adcirca | $6.4 | $7.3 | | Total Revenues | $677.7 | $506.9 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 results, highlighting 34% revenue growth from Tyvaso, operating expense trends, R&D pipeline progress, and the impact of a $1.0 billion share repurchase Results of Operations Total revenues increased 34% to $677.7 million driven by 56% Tyvaso growth, with R&D up 26% and SG&A up 65%, and a 23% effective tax rate Revenue by Product - Q1 2024 vs Q1 2023 (in millions) | Product | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Tyvaso | $372.5 | $238.4 | 56% | | Remodulin | $128.0 | $121.4 | 5% | | Orenitram | $106.2 | $88.2 | 20% | | Unituxin | $58.4 | $49.1 | 19% | | Total Revenues | $677.7 | $506.9 | 34% | - The increase in Tyvaso sales was primarily driven by higher quantities sold of Tyvaso DPI following its commercial launch and growth in use by PH-ILD patients[180] - R&D expense increased by 26% to $104.1 million, mainly due to higher spending on organ manufacturing projects and the TETON clinical studies for nebulized Tyvaso[190][192] - Share-based compensation expense increased significantly to $25.6 million from a benefit of $(12.4) million in the prior year, primarily due to STAP expense driven by a 4% increase in stock price in Q1 2024 versus a 19% decrease in Q1 2023[195] Research and Development R&D focuses on Phase 3 TETON studies for nebulized Tyvaso, ADVANCE OUTCOMES for ralinepag, and organ manufacturing initiatives like xenotransplantation - Enrolling two Phase 3 studies (TETON 1 and TETON 2) for nebulized Tyvaso in Idiopathic Pulmonary Fibrosis (IPF) and one Phase 3 study (TETON PPF) in Progressive Pulmonary Fibrosis (PPF)[145][147] - Enrolling the ADVANCE OUTCOMES Phase 3 study for ralinepag, a once-daily oral prostacyclin receptor agonist for PAH[151] - Organ manufacturing programs are a key long-term goal, with successful xenotransplants of porcine hearts (UHeart) and a thymokidney (UThymoKidney) into living human patients under compassionate use authorizations[154][161][166] - In February 2024, the company inaugurated a clinical-scale, designated pathogen-free (DPF) facility in Virginia to supply cGMP-compliant xenografts for human clinical trials[160] Financial Condition, Liquidity, and Capital Resources The company maintains $4.2 billion liquidity, initiated a $1.0 billion ASR, and reduced its credit facility balance to $600.0 million Liquidity Position (in millions) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,251.5 | $1,207.7 | | Marketable investments | $2,948.2 | $3,696.2 | | Total | $4,199.7 | $4,903.9 | - In March 2024, the company paid $1.0 billion to repurchase common stock under an ASR agreement[198][204] - The outstanding balance under the Credit Agreement was reduced to $600.0 million as of March 31, 2024, from $700.0 million at year-end 2023[199] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure since December 31, 2023 - There have been no material changes in the company's market risk exposure since the end of the previous fiscal year[208] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO have concluded that disclosure controls and procedures were effective as of the end of the period[209] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, such controls[209] Part II: Other Information Item 1. Legal Proceedings This section incorporates by reference the detailed discussion of legal proceedings from Note 12 of the consolidated financial statements - For details on legal proceedings, the report refers to Note 12—Litigation in the financial statements[210] Item 1A. Risk Factors This section outlines significant business risks, including reliance on treprostinil therapies, competition, IRA pricing pressures, supply chain, IP challenges, and PBC risks - The company relies heavily on sales of its treprostinil-based therapies (Tyvaso DPI, nebulized Tyvaso, Remodulin, Orenitram), which comprise the vast majority of revenues[211] - Competition is a major risk, with over fifteen competing PAH drugs and new entrants like Merck's Winrevair™ and potentially Liquidia's Yutrepia, which could materially adversely affect revenues[215] - The Inflation Reduction Act (IRA) is expected to have a significant impact, particularly the new Medicare Part D discounting program beginning in 2025, which will affect Orenitram and Tyvaso DPI revenues[247][250] - Manufacturing strategy exposes the company to risks, including reliance on third parties like MannKind for Tyvaso DPI and the complexity of developing manufacturing for organ programs[220][223][230] - Intellectual property rights may not deter competitors, with ongoing patent challenges from Liquidia regarding Tyvaso patents being a notable risk[273][276] - As a Public Benefit Corporation (PBC), directors must balance shareholder financial interests with the company's public benefit purpose, which could influence decisions in ways that do not maximize short-term shareholder value and may increase litigation risk[296][298] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In March 2024, the Board approved a $1.0 billion share repurchase program, initiating an ASR and receiving 3,275,199 shares - On March 25, 2024, the company initiated a $1.0 billion share repurchase program and entered into an ASR agreement with Citibank[299] - An initial delivery of 3,275,199 shares was received on March 27, 2024, representing approximately 80% of the total shares expected to be repurchased under the ASR agreement[299] Item 5. Other Information No director or Section 16 officer adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during Q1 2024 - No director or Section 16 officer adopted or terminated any Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements during the quarter[300] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, the accelerated share repurchase agreement, and officer certifications - Key exhibits filed include the Master Confirmation for the Accelerated Share Repurchase with Citibank, N.A., dated March 25, 2024[301]