On July 31, 2019 United Therapeutics Corporation (Nasdaq: UTHR) reported its financial results for the quarter ended June 30, 2019 (Press release, United Therapeutics, JUL 31, 2019, View Source [SID1234537934]).

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"Our prostacyclin product franchise, consisting of Remodulin, Tyvaso, and Orenitram, is being used by a larger number of pulmonary arterial hypertension (PAH) patients than ever before," said Martine Rothblatt, Ph.D., Chairman and Chief Executive Officer of United Therapeutics. "This momentum underscores our belief that our product franchise is well positioned to treat a large and growing number of PAH patients in need of a true prostacyclin analogue therapy. It also reinforces our commitment to advancing our innovative pipeline of next generation drug delivery systems and late stage clinical programs in cardiopulmonary diseases and oncology, as well as regenerative medicine and organ manufacturing programs to ultimately achieve our mission of finding a cure for PAH and other end-stage organ diseases."

Remodulin net product sales decreased by $3.7 million for the three months ended June 30, 2019, as compared to the same period in 2018. $10.3 million of the decrease was due to price reductions, primarily to our international distributors, partially offset by a net increase in total quantities shipped of $9.4 million. The net increase in shipments was due to higher quantities sold to our international distributors, partially offset by lower quantities sold to domestic distributors. Changes in quarterly Remodulin sales do not precisely reflect underlying patient demand or changes in patient census as, during the three months ended June 30, 2019, there was an increase in the number of U.S. patients being treated with Remodulin, as compared to the same period in 2018.

Tyvaso net product sales for the three months ended June 30, 2019 increased by $3.7 million as compared to the same period in 2018. This increase was primarily due to a price increase implemented in January 2019 and an increase in the number of patients being treated with Tyvaso, partially offset by higher gross-to-net revenue reductions.

Orenitram net product sales for the three months ended June 30, 2019 increased by $4.5 million as compared to the same period in 2018. This increase was primarily due to an increase in the number of patients being treated with Orenitram and a price increase implemented in January 2019.

Unituxin net product sales for the three months ended June 30, 2019 increased by $5.3 million as compared to the same period in 2018. This increase was due to an increase in the number of vials sold and a price increase implemented in April 2019.

Adcirca net product sales for the three months ended June 30, 2019 decreased by $80.7 million as compared to the same period in 2018. This decrease was primarily due to a decrease in bottles sold following the onset of generic competition for Adcirca beginning in August 2018.

Cost of product sales, excluding share-based compensation. The decrease in cost of product sales of $32.2 million for the three months ended June 30, 2019, as compared to the same period in 2018, was primarily attributable to a $34.4 million decrease in royalty expense for Adcirca because fewer bottles were sold due to the launch of generic versions of Adcirca beginning in August 2018.

Research and development expense, excluding share-based compensation. The increase in research and development expense of $16.7 million for the three months ended June 30, 2019, as compared to the same period in 2018, was driven by continued investment in our product pipeline. Research and development expense for the treatment of cardiopulmonary diseases increased by $19.0 million for the three months ended June 30, 2019, as compared to the same period in 2018, due to: (1) $11.7 million of expenditures associated with the phase III ADVANCE studies of ralinepag during the three months ended June 30, 2019; (2) increased spending of $2.2 million on the development of drug delivery devices; and (3) an $8.8 million in-process research and development impairment charge related to the termination of a license agreement during the three months ended June 30, 2019. The increase in total research and development expense was partially offset by a $5.4 million decrease in expense for cancer-related projects driven by the decrease in spending on the DISTINCT study, which is now fully-enrolled.

The increase in share-based compensation benefit of $57.7 million for the three months ended June 30, 2019, as compared to the same period in 2018, was primarily due to a $62.1 million increase in STAP benefit driven by a 33 percent decrease in our stock price for the three months ended June 30, 2019, as compared to a 1 percent increase in our stock price for the same period in 2018; partially offset by: (1) a $2.6 million increase in stock option expense due to additional awards granted and outstanding in 2019; and (2) a $1.8 million increase in restricted stock unit expense due to additional awards granted and outstanding in 2019.

Other Income (Expense), Net

The increase in other income (expense), net of $33.7 million for the three months ended June 30, 2019, as compared to the same period in 2018, was primarily due to the recognition of a net unrealized gain in investments in equity securities with readily determinable fair values. During the three months ended June 30, 2019, we recognized $29.5 million of net unrealized gains on these securities.

Income Tax Expense

The income tax expense was $45.3 million for the three months ended June 30, 2019, as compared to $45.0 million for the same period in 2018. The income tax expense is based on an estimated effective tax rate (ETR) for the entire year. The estimated annual ETR is subject to adjustment in subsequent quarterly periods if components used to calculate the estimated annual ETR are updated or revised. Our actual ETR as of June 30, 2019 and June 30, 2018 was 28 percent and 21 percent, respectively. We recognized a loss before income taxes, and a corresponding income tax benefit, for the six months ended June 30, 2019, as a result of the one-time $800.0 million payment to Arena Pharmaceuticals, Inc. in January 2019. As a result of this loss, our anticipated tax credits and foreign sales deduction, partially offset by non-deductible compensation expense, increased our tax benefit and resulting ETR for the six months ended June 30, 2019, compared to the same period in 2018.

Non-GAAP Earnings

Non-GAAP earnings is defined as net income, adjusted for: (1) share-based compensation (benefit) expense (including expenses relating to stock options, restricted stock units, share tracking awards and our employee stock purchase plan); (2) unrealized (gains) losses on equity securities; (3) impairment charges; and (4) tax expense (benefit) on non-GAAP earnings adjustments.

On July 29, 2019, we granted a total of 817 restricted stock units under our 2019 Inducement Stock Incentive Plan to two newly hired employees. These restricted stock units vest in three equal installments on July 31, 2020, July 31, 2021 and July 31, 2022, assuming continued employment on such dates, and are subject to the standard terms and conditions we filed with the SEC as Exhibit 10.2 to our Current Report on Form 8-K on March 1, 2019. We are providing this information in accordance with Nasdaq Listing Rule 5635(c)(4).

Conference Call

We will host a half-hour teleconference on Wednesday, July 31, 2019, 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 1-855-859-2056, with international callers dialing 1-404-537-3406, and using access code: 3066089.

This teleconference will also be webcast and can be accessed via our website at View Source