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United Therapeutics Corporation Reports 2010 Fourth Quarter and Annual Financial Results

SILVER SPRING, Md., Feb. 15, 2011 /PRNewswire/ -- United Therapeutics Corporation (Nasdaq: UTHR) today announced its financial results for the fourth quarter and year ended December 31, 2010.

"We finished 2010 with solid operating results led by the growth in our revenues," remarked Martine Rothblatt, Ph.D., United Therapeutics' Chairman and Chief Executive Officer. "In addition, we are pleased to announce that we expect to unblind our FREEDOM-M pivotal study of oral treprostinil as monotherapy for pulmonary arterial hypertension in June 2011. We also expect to fully enroll and then unblind our FREEDOM-C2 pivotal study of oral treprostinil as combination therapy for pulmonary arterial hypertension in April and September 2011, respectively."

Total revenues for the three months ended December 31, 2010, were $166.5 million, up from $108.9 million for the quarter ended December 31, 2009.  Net income for the three months ended December 31, 2010, was $9.5 million or $0.17 per basic share, compared to a net loss of $3.3 million or $0.06 per basic share for the quarter ended December 31, 2009. For the year ended December 31, 2010, we had net income of $105.9 million, or $1.89 per basic share and $1.78 per diluted share, compared to $19.5 million, or $0.37 per basic share and $0.35 per diluted share, for the year ended December 31, 2009.  Earnings before non-cash charges(1) for the three months ended December 31, 2010, were $72.4 million or $1.27 per basic share, compared to $36.2 million or $0.67 per basic share for the three months ended December 31, 2009.

(1) See definition of earnings before non-cash charges, a non-GAAP financial measure, and a reconciliation of net income to earnings before non-cash charges below.

Results

Revenues. Revenues for the quarter ended December 31, 2010 increased by $57.6 million when compared to the quarter ended December 31, 2009. The growth in revenues is predominately from the increase in the number of patients being prescribed our products. In addition, sales of Remodulin increased by approximately $9.2 million as the result of price increases that went into effect during 2010. Gross margin from sales for the quarters ended December 31, 2010 and 2009 were $146.0 million and $95.1 million, respectively, or 88% of total revenue for both of these quarters. These trends were consistent with the results for the years ended December 31, 2010 and December 31, 2009.

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


                          Three Months Ended      Year Ended

                          December 31,            December 31,

                          2010        2009        2010        2009

Cardiopulmonary products:

Remodulin                 $ 101,879$ 86,415$ 403,599$ 331,579

Tyvaso                    48,714      15,155      151,797     20,268

Adcirca                   12,804      4,275       36,307      5,789

Telemedicine products and
services                  2,787       2,795       10,932      10,968

License fees              293         283         1,196       1,244

Total revenues            $ 166,477$ 108,923$ 603,831$ 369,848


Operating Expenses. Our operating expenses 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,

                               2010       2009       2010        2009

Project and non-project:

Cardiopulmonary                $ 31,908$ 22,906$ 86,161$ 61,574

Share-based compensation       19,774     11,129     45,878      36,294

Other                          10,573     6,997      34,722      24,320

Total research and development
expense                        $ 62,255$ 41,032$ 166,761$ 122,188


Cardiopulmonary.  The increase in cardiopulmonary project expenses of $9.0 million for the quarter ended December 31, 2010 compared to the same quarter in 2009 reflected primarily: (1) an increase in expenses incurred in connection with our FREEDOM-M and FREEDOM-C2 Phase III clinical trials, which was largely offset by a decrease in expenses related to our inhaled treprostinil program; and (2) an increase of $9.3 million in expenses related to our development of beraprost-MR, which includes $9.0 million in milestone-related expenses. 

Share-based compensation.  The increase in share-based compensation expense of $8.6 million for the quarter ended December 31, 2010 over the same quarter in 2009 reflected: (1) an increase in the fair value of awards granted under our Share Tracking Awards Plan (STAP), principally as a result of the increase in the price of our common stock; (2) an increase in the number of outstanding STAP awards; and (3) increases in both the number of STAP awards vested and the time that unvested STAP awards had accrued toward vesting as of December 31, 2010.

Other.  Other research and development expenses increased $3.6 million during the quarter ended December 31, 2010 compared to the same quarter in 2009 reflected primarily an increase in personnel, depreciation and overhead costs supporting our research mainly because 2010 was the first full year of operations of our new facilities in North Carolina and Maryland. Research and development expenses for our individual disease platforms include only direct labor and related direct costs.

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


                           Three Months Ended    Year Ended

                           December 31,          December 31,

                           2010       2009       2010        2009

Category

General and administrative $ 28,302$ 28,894$ 83,077$ 68,606

Sales and marketing        14,147     11,860     49,332      43,593

Share-based compensation   32,549     15,823     67,191      64,139

Total selling, general and
administrative expense     $ 74,998$ 56,577$ 199,600$ 176,338


Sales and marketing.  The increase in sales and marketing expenses of $2.3 million for the quarter ended December 31, 2010 compared to the same quarter in 2009, is predominately due to an increase in payroll and training-related expenses as a result of our headcount expansion of approximately 50 sales and marketing personnel during the quarter ended December 31, 2010.

Share-based compensation.  For the quarter ended December 31, 2010, share-based compensation increased by $16.7 million over the same period in 2009 as a result of a $10.9 million increase in share-based compensation recognized for our STAP due to the same factors noted above and an $8.8 million increase related to a year-end stock option award to our Chief Executive Officer primarily as a result of the appreciation in the price of our common stock over the year.

Income Tax Benefit. We recognized income tax benefits of $5.0 million and $1.4 million for the quarter ended December 31, 2010 and 2009, respectively. The $3.6 million increase in income tax benefits recognized during the quarter ended December 31, 2010 corresponded to increases in the domestic manufacturing deduction and business tax credits generated from our orphan drug-related research and development activities.

Earnings Before Non-Cash Charges

Earnings before non-cash charges is defined as net income, adjusted for the following non-cash charges, as applicable: (1) interest; (2) income taxes; (3) license fees; (4) depreciation and amortization; (5) impairment charges; and (6) share-based compensation (stock option and share tracking award expense).

A reconciliation of net income (loss) to earnings before non-cash charges is presented below (in thousands, except per share data):





                                                                    Three Months Ended

             Year Ended December 31,                                December 31,

             2010        2009        2008            2007           2010       2009

Net (loss)
income, as
reported     $ 105,916$ 19,462$ (49,327)$ 12,353$ 9,544$ (3,330)

Add
(subtract)
non-cash
charges:

Interest
expense      19,714      12,875      11,439          14,281         5,459      3,659

Income tax
expense
(benefit)    41,923      (695)       (34,394)        (7,876)        (5,039)    (1,403)

License fees —         —         150,000     (1) 11,013    (2)  —        —

Depreciation
and
amortization 17,920      11,394      4,536           3,427          3,739      4,721

Impairment
charges      6,177       5,457       1,605           3,582          6,177      5,058

Share-based
compensation 113,636     100,810     36,393          48,766         52,558     27,502

Earnings
before
non-cash
charges      $ 305,286$ 149,303$ 120,252$ 85,546$ 72,438$ 36,207



Earnings
before
non-cash
charges per
share:

Basic        $ 5.44$ 2.80$ 2.63$ 1.98$ 1.27$ 0.67

Diluted      $ 5.13$ 2.66$ 2.41$ 1.87$ 1.17$ 0.62



Weighted
average
number of
common
shares
outstanding:

Basic          56,142      53,314      45,802          42,448         57,187     53,926

Diluted        59,516      56,133      49,900          44,902         61,715     57,944



(1) During the three months ended December 31, 2008, we made an upfront payment of $150.0
million to Eli Lilly and Company (Lilly) as required by our license and manufacturing and
supply agreements. We also issued approximately 6.3 million shares of our common stock to
Lilly in exchange for $150.0 million under a stock purchase agreement entered into
together with the license and manufacturing and supply agreements. Because 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.



(2) 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.





Conference Call

We will host a half-hour teleconference on Tuesday, February 15, 2011, at 9:00 a.m. Eastern Time. The teleconference is accessible by dialing 1-877-351-5881, with international callers dialing 1-970-315-0533. A rebroadcast of the teleconference will be available for one week by dialing 1-800-642-1687, with international callers dialing 1-706-645-9291 and using access code 38865359.

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 non-cash charges to assist us in: (a) planning, including the preparation of our internal annual operating budget; (b) allocating resources to enhance the financial performance of our business; (c) evaluating the effectiveness of our operational strategies; and (d) evaluating our capacity to fund capital expenditures and expand our business. We believe this non-GAAP financial measure enhances investors' understanding of our financial results by excluding certain expenses that we do not consider when evaluating and comparing the performance of our core operations and making operating decisions. In addition, we have historically reported earnings before non-cash charges to investors, and believe the inclusion of this non-GAAP financial measure provides investors with a consistent method of comparison to historical periods. However, there are limitations in the use of this non-GAAP financial measure as it excludes certain operating expenses that are recurring in nature. Furthermore, our calculation of this non-GAAP financial measure may differ from the methodology used by other companies. The presentation of this non-GAAP financial measure should not to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of net income, the most directly comparable GAAP financial measure, to earnings before non-cash charges can be found in the table above under the heading, 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 about operating results and demand for our products, and our expected timing of enrollment and unblinding of our FREEDOM-M and FREEDOM-C2 clinical trials. 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 10-Q, 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 15, 2011, 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      Year Ended

                                December 31,            December 31,

                                2010        2009        2010        2009



Revenues:

Net product sales               $ 163,445$ 105,945$ 591,881$ 357,870

Service sales                   2,738       2,697       10,753      10,751

License fees                    294         281         1,197       1,227

Total revenues                  166,477     108,923     603,831     369,848

Operating expenses:

Research and development        62,255      41,032      166,761     122,188

Selling, general and
administrative                  74,998      56,577      199,600     176,338

Cost of product sales           18,536      12,233      67,716      40,890

Cost of service sales           1,637       1,263       5,749       4,431

Total operating expenses        157,426     111,105     439,826     343,847

(Loss) income from operations   9,051       (2,182)     164,005     26,001

Other income (expense):

Interest income                 629         1,005       2,939       5,146

Interest expense                (5,459)     (3,659)     (19,714)    (12,875)

Equity loss in affiliate        (30)        (42)        (160)       (141)

Other, net                      314         145         769         636

Total other (expense) income,
net                             (4,546)     (2,551)     (16,166)    (7,234)

Income (loss) before income tax 4,505       (4,733)     147,839     18,767

Income tax benefit (expense)    5,039       1,403       (41,923)    695

Net income (loss)               $ 9,544$ (3,330)$ 105,916$ 19,462

Net income (loss) per common
share:

Basic                           $ 0.17$ (0.06)$ 1.89$ 0.37

Diluted                         $ 0.15$ (0.06)$ 1.78$ 0.35

Weighted average number of
common shares outstanding:

Basic                           57,187      53,926      56,142      53,314

Diluted                         61,715      53,926      59,516      56,133








SELECTED CONSOLIDATED BALANCE SHEET DATA

(In thousands)



                                                         December 31,

                                                         2010        2009

Cash, cash equivalents and marketable securities
(excluding restricted amounts of $5,122 and $39,976,
respectively)                                            $ 759,932$ 378,120

Total assets                                             1,431,635   1,051,544

Total liabilities and common stock subject to repurchase 547,749     398,535

Total stockholders' equity                               883,886     653,009







SOURCE United Therapeutics Corporation

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