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United Therapeutics Corporation Reports 2009 Fourth Quarter and Annual Financial Results

SILVER SPRING, Md., Feb. 16 /PRNewswire-FirstCall/ -- United Therapeutics Corporation (Nasdaq: UTHR) today announced its financial results for the fourth quarter and year ended December 31, 2009.  

"We are pleased that our revenues for 2009 grew in excess of 30% for the eighth consecutive year to $370 million," remarked Martine Rothblatt, Ph.D., United Therapeutics' Chairman and Chief Executive Officer. "Along with the continued positive trend relative to Remodulin, we are also excited about the potential to reach even more pulmonary hypertension patients in 2010 with Tyvaso and Adcirca."

Total revenues for the three months ended December 31, 2009, were $108.9 million, up from $75.9 million for the three months ended December 31, 2008.  Net loss for the three months ended December 31, 2009, was $3.3 million or $0.06 per basic share, compared to a net loss of $82.1 million or $1.73 per basic share for the three months ended December 31, 2008. For the year ended December 31, 2009, we had net income of $19.5 million, or $0.37 per basic share and $0.35 per diluted share, as compared to a net loss of $49.3 million, or $1.08 per basic and diluted share, for the year ended December 31, 2008.  Research and development expense for the three months and year ended December 31, 2008, included a $150.0 million charge related to a one-time, upfront payment to Eli Lilly and Company (Lilly) pursuant to agreements for the license, manufacture and supply of Adcirca (tadalafil) tablets for pulmonary hypertension.

Earnings before non-cash charges, a non-GAAP financial measure, defined as net (loss) income before income taxes, non-cash interest, license fee expenses, depreciation, amortization, impairment charges and share-based compensation (stock option and share tracking award expense), for the three months ended December 31, 2009, was $36.2 million or $0.67 per basic share, compared to $25.1 million or $0.53 per basic share for the three months ended December 31, 2008. All share and per share amounts appearing in this press release reflect the two-for-one split of our common stock, which occurred during the quarter ended September 30, 2009.

Results for the three months and year ended December 31, 2008, have been adjusted for the retrospective adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification™ 470-20, Debt with Conversion Options and Other Options (formerly FASB Staff Position No. APB 14-1) (FASB ASC 470-20), which became effective January 1, 2009.  

Results

Revenues.Revenues for the year ended December 31, 2009, increased by 31% over those for the year ended December 31, 2008, from $281.5 million to $369.8 million. The growth in revenues experienced during 2009 resulted in large part from the increase in the number of patients prescribed Remodulin (treprostinil) Injection and the commercial launches of our inhaled prostacyclin, Tyvaso (treprostinil) Inhalation Solution, and our oral phosphodiesterase type 5 inhibitor, Adcirca. Gross margins from sales were $323.3 million and $249.2 million, or 88% and 89%, for the years ended December 31, 2009 and 2008, respectively.

The table below summarizes the components of revenues (in thousands):

    
    
    
                                   Three Months Ended         Year Ended
                                      December 31,            December 31,
                                     ------------            ------------
                                    2009        2008       2009        2008
                                    ----        ----       ----        ----
    
    Revenues:
       Remodulin                  $86,415    $73,137    $331,579     $269,718
       Tyvaso                      15,155          -      20,268            -
       Adcirca                      4,275          -       5,789            -
       Telemedicine products and
        services                    2,795      2,370      10,968        9,485
       Other products                 283        355       1,244        2,294
                                      ---        ---       -----        -----
       Total revenues            $108,923    $75,862    $369,848     $281,497
                                 ========    =======    ========     ========

Operating Expenses. Our operating expenses principally consist of research and development, selling, general and administrative, and costs of service and product sales.  

The table below summarizes research and development expense by major project and non-project components (in thousands):

    
    
                                    
                                  Three Months Ended       Year Ended
                                     December 31,          December 31,
                                    ------------          ------------ 
                                  2009        2008       2009       2008
                                  ----        ----       ----       ----
    
     Project and non-project:
      Cardiovascular           $22,906     $20,890     $61,575      $60,549
        License fees                 -     150,000           -      150,000
      Cancer                       793         687       3,093        2,771
      Infectious disease         1,126         725       4,106        1,556
      Share-based compensation  11,129       4,918      36,294       16,200
      Other                      5,078       2,531      17,120        8,105
                                 -----       -----      ------        -----
      Total research and
       development expense     $41,032    $179,751    $122,188     $239,181
                               =======    ========    ========     ========

Cardiovascular license fees—Adcirca.  Cardiovascular license fees for the year ended December 31, 2008, reflected the one-time, upfront payment to Lilly of $150.0 million associated with the licensing and commercialization of Adcirca, which we expensed during the quarter ended December 31, 2008. There were no comparable transactions during the year ended December 31, 2009.

Share-based compensation.  The increase in share-based compensation expense for both the three months and year ended December 31, 2009, over that for the same periods in 2008, was primarily due to: (i) the increase in the fair value of awards granted under the United Therapeutics Share Tracking Awards Plan (STAP) as a result of the increase in the price of our common stock; (ii) an increase in the number of outstanding STAP awards; and (iii) the number of STAP awards vested and the time that unvested STAP awards had accrued toward vesting as of December 31, 2009.

Other.  The increase in other research and development expenses of approximately $2.5 million and $9.0 million during the quarter and year ended December 31, 2009, respectively, as compared to the same periods in 2008, corresponded mainly to an increase in expenditures related our investigational projects, including those within our monoclonal antibody and glycobiology antiviral agent therapeutic platforms, and an increase in personnel and overhead costs related to supporting  our research and development.  Research and development expenses for our individual disclosed platforms includes only direct labor and out-of-pocket expenses, and excludes overhead and indirect personnel costs.

The table below summarizes selling, general and administrative expense by major categories (in thousands):

    
    
                                      
                                    Three Months Ended        Year Ended
                                       December 31,          December 31,
                                      ------------           ------------
                                    2009         2008      2009         2008
                                    ----         ----      ----         ----
    
    Category
      General and administrative $28,894      $13,171    $68,606      $41,284
      Sales and marketing         11,860        8,778     43,593       32,899
      Share-based compensation    15,823          (84)    64,139       20,123
                                  ------          ---     ------       ------
      Total selling, general and
       administrative expense    $56,577      $21,865   $176,338      $94,306
                                 =======      =======   ========      =======

General and administrative.  During the three months and year ended December 31, 2009, general and administrative expense increased $15.7 million and $27.3 million, respectively, over the three months and year ended December 31, 2008, for the following reasons:

    --  An impairment charge of $4.2 million recognized during the three months
        ended December 31, 2009, on three of our Silver Spring, Maryland,
        properties that housed employees prior to relocating to our
        newly-completed combination office and laboratory building in Silver
        Spring. The old buildings are scheduled to be razed in 2010 in
        connection with commencement of construction on the last phase of our
        Silver Spring campus;


    --  Increases in professional fees of approximately $1.2 million and $4.2
        million, for the three months and year ended December 31, 2009,
        respectively, related to ongoing litigation, reviewing potential
        acquisitions, entering new license agreements, and other matters;


    --  $3.7 million of expenses during the three months ended December 31,
        2009, for validation work to manufacture Remodulin on different
        equipment; and


    --  An increase in general operating expenses of $3.4 million and $13.7
        million for the three months and year ended December 31, 2009,
        respectively, primarily resulting from the overall growth of the company
        this year.


Sales and marketing.  The increases in sales and marketing expenses for both the quarter and year ended December 31, 2009, were primarily related to increased expenses for the commercialization of our two new products, Tyvaso and Adcirca.

Share-based compensation.  For the quarter ended December 31, 2009, share-based compensation increased by $15.9 million over the same period in 2008 for two reasons.  First, during the quarter ended December 31, 2008, we reversed approximately $6.4 million in estimated compensation expense that had been accrued through September 30, 2008, for a potential year-end stock option grant to our Chief Executive Officer, which is based on a formula in her employment agreement.  Our Chief Executive Officer did not receive a stock option grant for the year ended December 31, 2008.  By contrast, our Chief Executive Officer did receive a year-end stock option grant at the end of 2009 in accordance with the formula in her employment agreement, and we recognized approximately $1.5 million in share-based compensation expense related to this option grant for the quarter ended December 31, 2009.  The total share-based compensation recognized during 2009 related to the year-end stock option grant to our Chief Executive Officer was $14.5 million.  Second, the remainder of the increase in share-based compensation expense for both the three months and year ended December 31, 2009, resulted from the following: (i) the increase in the fair value of awards granted under the STAP as a result of the increase in the price of our common stock; (ii) an increase in the number of outstanding STAP awards; and (iii) the number of STAP awards vested and the time that unvested STAP awards had accrued toward vesting as of December 31, 2009.

Income Tax Benefit. As a result of the net losses we incurred before income taxes, we recognized income tax benefits of $1.4 million and $53.1 million, respectively, for the three months ended December 31, 2009 and 2008. For the year ended December 31, 2009, we recognized income tax benefits of approximately $695,000 from the business tax credits we generate from our orphan drug-related research and development activities.

    
    
                           Earnings Before Non-Cash Charges
    
    A reconciliation of net (loss) income to earnings before non-cash charges
     is presented below (in thousands, except per share data):
        
                                                            Three Months Ended
                             Year Ended December 31,            December 31,
                       ------------------------------------   ----------------
                               2008(1)    2007(1)   2006(1)            2008(1)
                                 As         As        As                 As  
                        2009   adjusted  adjusted  adjusted   2009    adjusted
                       -----   --------  --------  --------   ----    --------
    Net (loss) 
     income, 
     as reported      $19,462  $(49,327)  $12,353  $72,596  $(3,330) $(82,070)
    Add (subtract)
     non-cash 
     charges:             
      Amortization of
       debt discount 
       and issue 
       costs           12,875    11,439    14,281    2,417    3,659     2,530 
      Income tax 
       benefit, net 
       of taxes paid     (695)  (34,394)   (9,431) (34,927)  (1,403)  (53,146)
      License fee           -   150,000(2) 11,013(3)     -        -   150,000
      Depreciation and 
       amortization    11,394     4,955     3,427    2,713    4,721     1,810 
      Impairments       5,457     1,605     3,582    2,024    5,058     1,100 
      Share-based 
       compensation   100,810    36,393    48,766   23,513   27,502     4,852 
                      -------    ------    ------   ------   ------     -----
    Earnings before
     non-cash 
     charges         $149,303  $120,671   $83,991  $68,336  $36,207   $25,076 
                     ========  ========   =======  =======  =======   =======
    Earnings before
     non-cash 
     charges per 
     share:               
      Basic(4)          $2.80     $2.63     $1.98    $1.48    $0.67     $0.53 
                        =====     =====     =====    =====    =====     =====
      Diluted(5)        $2.66     $2.42     $1.87    $1.42    $0.62     $0.51 
                        =====     =====     =====    =====    =====     =====
    
    
    (1) Adjusted for the retrospective adoption of FASB ASC 470-20.
    (2) During the three months ended December 31, 2008, we made a one-time
        payment of $150.0 million to Lilly related to our license and
        manufacturing and supply agreements. We also issued approximately 3.2
        million shares of our common stock to Lilly for $150.0 million under a
        related stock purchase agreement. Since there was no net impact on our
        cash flows associated with these transactions, we have presented the
        related up-front payment as an adjustment to net loss. 
    (3) During the year ended December 31, 2007, we issued 400,000 shares of
        our common stock to Toray Industries, Inc. The fair value of the
        shares issued was expensed as research and development. 
    (4) Calculated by dividing earnings before non-cash charges presented 
        above by the weighted average number of shares outstanding for the
        period. 
    (5) Calculated by dividing earnings before non-cash charges presented 
        above by the weighted average number of shares outstanding for the
        period adjusted for potentially dilutive securities. For the quarter
        and year ended December 31, 2009, approximately 57.9 million shares
        and 56.1 million shares, respectively, were used to calculate diluted 
        earnings before non-cash charges. For the quarter and year ended 
        December 31, 2008, approximately 49.3 million shares and 49.9 million
        shares, respectively, were used to calculate diluted earnings before
        non-cash charges.

Conference Call  

We will host a half-hour teleconference on Tuesday, February 16, 2010, at 9:00 a.m. Eastern Time. The teleconference is accessible by dialing 888-695-0608, with international callers dialing 719-325-2204. A rebroadcast of the teleconference will be available for one week by dialing 888-203-1112, with international callers dialing 719-457-0820 and using access code 5260604.

This teleconference is also being webcast and can be accessed via our website at http://ir.unither.com/events.cfm.

About United Therapeutics

United Therapeutics Corporation is a biotechnology company focused on the development and commercialization of unique products to address the unmet medical needs of patients with chronic and life-threatening conditions.

Non-GAAP Financial Information

This press release contains a financial measure that does not comply with United States generally accepted accounting principles (GAAP). This measure supplements our financial results prepared in accordance with GAAP as reported below.

We use earnings before taxes and non-cash charges, a non-GAAP financial measure:

(a) as measurements of operating performance because it assists us in comparing our operating performance on a consistent basis by excluding the impact of expenses not directly resulting from our core operations; (b) for planning purposes, including the preparation of our internal annual operating budget; (c) to allocate resources to enhance the financial performance of our business; (d) to evaluate the effectiveness of our operational strategies; and (e) to evaluate our capacity to fund capital expenditures and expand our business. We believe this non-GAAP financial measure enhances investors' understanding of our performance by excluding certain expenses that may not be indicative of our core operating measures. In addition, because we have historically reported earnings before non-cash charges to investors, we believe the inclusion of this non-GAAP financial measure provides consistency in our financial reporting. The presentation of this non-GAAP financial measure is not to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of earnings before non-cash charges to net income, the most directly comparable GAAP financial measure, can be found in the table above under Earnings Before Non-Cash Charges.

Forward-looking Statements

Statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, our expectations and intentions related to financial performance and results, including annual revenue growth and our expectations about continued growth of Remodulin and Tyvaso and Adcirca's potential to reach more patients. These forward-looking statements are subject to certain risks and uncertainties, such as those described in our periodic reports filed with the Securities and Exchange Commission, that could cause actual results to differ materially from anticipated results.  Consequently, such forward-looking statements are qualified by the cautionary statements, cautionary language and risk factors set forth in our periodic reports and documents filed with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10Q, and current reports on Form 8-K.  We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We are providing this information as of February 16, 2010, and assume no obligation to update or revise the information contained in this press release whether as a result of new information, future events or any other reason.

Remodulin and Tyvaso are registered trademarks of United Therapeutics Corporation.

Adcirca is a registered trademark of Eli Lilly and Company.

    
    
                           UNITED THERAPEUTICS CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS 
                         (In thousands, except per share data)
    
    
                            Three Months Ended      For the Years Ended
                               December 31,             December 31,
                               ------------             ------------
                             2009        2008       2009          2008
                             ----        ----       ----          ----
                                          As                       As
                                       Adjusted                 Adjusted
                                         (1)                       (1)
    Revenues:
        Net product
         sales           $105,945        $73,206  $357,870      $270,005
        Service sales       2,697          2,314    10,751         9,258
        License fees          281            342     1,227         2,234
                              ---            ---     -----         -----
         Total revenues   108,923         75,862   369,848       281,497
    Operating
     expenses:
        Research and
         development       41,032        179,751   122,188       239,181
        Selling,
         general and
         administrative    56,577         21,865   176,338        94,306
        Cost of product
         sales             12,233          7,267    40,890        26,957
        Cost of service
         sales              1,263            839     4,431         3,109
                            -----            ---     -----         -----
         Total operating
          expenses        111,105        209,722   343,847       363,553
         (Loss) income
          from
          operations       (2,182)      (133,860)   26,001       (82,056)
    Other income
     (expense):
        Interest income     1,005          2,302     5,146        11,025
        Interest
         expense           (3,659)        (2,530) (12,875)       (11,439)
        Equity loss in
         affiliate            (42)           (71)     (141)         (226)
        Other, net            145         (1,057)      636        (1,025)
                              ---         ------       ---        ------
         Total other
          (expense)
          income, net      (2,551)        (1,356)   (7,234)       (1,665)
    (Loss) income
     before income
     tax benefit           (4,733)      (135,216)   18,767       (83,721)
    Income tax
     benefit                1,403         53,146       695        34,394
                            -----         ------       ---        ------
    Net (loss)
     income               $(3,330)      $(82,070)  $19,462      $(49,327)
                          =======       ========   =======      ========
    Net (loss)
     income per
     common share:(2)
        Basic              $(0.06)        $(1.73)    $0.37        $(1.08)
                           ======         ======     =====        ======
        Diluted            $(0.06)        $(1.73)    $0.35        $(1.08)
                           ======         ======     =====        ======
    Weighted
     average number
     of common
     shares
     outstanding: (2)
        Basic              53,926         47,454    53,314        45,802
                           ======         ======    ======        ======
        Diluted            53,926         47,454    56,133        45,802
                           ======         ======    ======        ======
    
    (1) Adjusted for the retrospective adoption of FASB ASC 470-20.
    (2) All share and per share data have been adjusted from previously
        reported amounts to reflect the two-for-one stock split effected
        September 22, 2009.
    
    
    
                    SELECTED CONSOLIDATED BALANCE SHEET DATA
                                 (In thousands)
    
                                                           December 31,
                                                           ------------
                                                        2009       2008(1)
                                                        ----       -------
    Cash, cash equivalents and marketable
     securities
      (excluding restricted amounts of $39,976 and
       $45,755, respectively)                       $378,120      $336,318
    Total assets                                   1,051,544       874,534
    Total liabilities and common stock subject to
     repurchase                                      398,535       319,200
    Total stockholders' equity                       653,009       555,334
    
    (1) Adjusted for the retrospective adoption of FASB ASC 470-20. 
    

SOURCE United Therapeutics Corporation

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