On February 24, 2021 United Therapeutics Corporation (Nasdaq: UTHR) reported its financial results for the fourth quarter and year ended December 31, 2020 (Press release, United Therapeutics, FEB 24, 2021, View Source [SID1234575507]). Full year net revenue rose to $1,483 million, as U.S. patients being treated with the company’s treprostinil-based therapies reached an all-time high during the fourth quarter.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"We’re entering 2021 better positioned than at any time in our history," said Martine Rothblatt, Ph.D., Chairman and Chief Executive Officer of United Therapeutics. "We are working toward four product launches this year, led by the recent launch of the Remunity Pump and followed by the upcoming Tyvaso label expansion into pulmonary hypertension associated with interstitial lung disease (PH-ILD), the Implantable System for Remodulin (ISR), and the innovative Tyvaso DPI device, assuming we receive the relevant FDA approvals. At the same time, our development teams continue to drive innovation in the pulmonary hypertension space as detailed in the recent New England Journal of Medicine publication of our INCREASE data in PH-ILD and our recent announcement of Tyvaso DPI clinical data, which suggest a comparable systemic treprostinil exposure to our approved Tyvaso Inhalation System."

"We are pleased that our treprostinil-based products achieved another record year of annual net revenues and total U.S. patients on therapy, trends we expect to continue, fueled by our four planned product launches this year," said Michael Benkowitz, President and Chief Operating Officer of United Therapeutics. "We are deep into commercial launch preparations for Tyvaso in PH-ILD and expect that this indication could expand the use of Tyvaso to more than double the current number of patients on therapy in the near term. Additionally, we’re focused on the ISR and the Tyvaso DPI launches targeted for later this year."

FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL RESULTS

Key financial highlights include (dollars in millions, except per share data):

Net product sales of our treprostinil-based products (Remodulin, Tyvaso, and Orenitram) grew by $65.2 million for the year ended December 31, 2020, as compared to 2019. This increase was driven by growth in U.S. net product sales of our treprostinil-based products of $122.6 million in 2020, as compared to 2019, partially offset by a $57.4 million decline in net product sales of our treprostinil-based products outside the United States.

In addition, as previously disclosed, our 2019 quarterly results were impacted by a mistake by one of our U.S. distributors in its utilization data, which resulted in the distributor ordering more product than normal, primarily in the third quarter of 2019. Upon the distributor’s correction of its utilization data in the fourth quarter of 2019, the distributor reduced its purchases of our products in the fourth quarter of 2019 in order to normalize its inventory levels (collectively, the Corrected Order). We estimate that the Corrected Order reduced net product sales for Remodulin, Tyvaso, and Orenitram by approximately $18.3 million, $12.7 million, and $6.1 million, respectively, or $37.1 million in total, during the fourth quarter of 2019. Absent the Corrected Order, there would have been no change in U.S. net product sales for Remodulin and our net product sales for Tyvaso and Orenitram would have grown by 27 percent and 30 percent, respectively, in the fourth quarter of 2020, as compared to the fourth quarter of 2019. We are providing these non-GAAP financial measures to show the period-to-period revenue change for these products in the absence of the Corrected Order to improve investors’ understanding of our financial results. In addition, while this inventory fluctuation had a significant impact on our U.S. revenues during the third and fourth quarters of 2019, the effect on full-year U.S. revenues was negligible.

The year-over-year increase in quarterly revenues for Remodulin, Tyvaso, and Orenitram were all impacted by the Corrected Order, as discussed above. In addition, the increases in year-over-year quarterly revenues for Tyvaso and Orenitram resulted from: (1) an increase in quantities sold, reflecting a growing number of patients; and (2) to a lesser extent, price increases for Tyvaso.

The reduction in annual Remodulin revenues for 2020 compared to 2019 was primarily driven by: (1) a reduction in quantities sold in Europe, which we believe resulted from generic competition and the impact of COVID-19; and (2) to a lesser extent, a reduction in U.S. Remodulin revenues, which we believe resulted from the impact of COVID-19. The growth in annual Tyvaso revenues for 2020 compared to 2019 was due to an increase in quantities sold, reflecting a growing number of patients, and price increases. The growth in annual Orenitram revenues for 2020 compared to 2019 was due to an increase in quantities sold, as the number of patients being treated with Orenitram grew following the update to Orenitram’s labeling to reflect the FREEDOM-EV clinical trial results. The decrease in annual Adcirca revenues for 2020 compared to 2019 was driven by continued erosion of market share due to generic competition.

Expenses

Cost of product sales. The table below summarizes cost of product sales by major category (dollars in millions):

Cost of product sales, excluding share-based compensation. The decrease in cost of product sales for the year ended December 31, 2020, as compared to the same period in 2019, was primarily attributable to decreases in royalty expense for Adcirca, as fewer bottles were sold following the onset of generic competition for Adcirca beginning in August 2018.

Research and development expense, excluding share-based compensation. The decrease in research and development expense for the year ended December 31, 2020, as compared to the same period in 2019, was due to a one-time, $800.0 million up-front payment to Arena Pharmaceuticals, Inc. (Arena) under our license agreement related to ralinepag during the year ended December 31, 2019. The remainder of the decrease resulted primarily from: (1) the completion of the phase 3 BEAT study of esuberaprost in April 2019, the completion of the phase 3 DISTINCT study of Unituxin in February 2020, and the discontinuation of the phase 3 SOUTHPAW study of Orenitram in October 2019; (2) a decrease in spending due to terminated drug delivery device projects; and (3) an impairment charge related to the termination of a license agreement during the year ended December 31, 2019.

Selling, general, and administrative expense. The table below summarizes selling, general, and administrative expense by major category (dollars in millions):

The increase in share-based compensation expense for the quarter and year ended December 31, 2020, as compared to the same periods in 2019, was primarily due to an increase in STAP expense driven by a 50 percent and a 72 percent increase in our stock price during the quarter and year ended December 31, 2020, respectively, as compared to a 10 percent increase and 19 percent decrease in our stock price for the quarter and year ended December 31, 2019, respectively. The increase in share-based compensation expense for the year ended December 31, 2020 was partially offset by a decrease in stock option expense due to fewer awards granted and outstanding in 2020 as compared to the same period in 2019.

Other income, net. The increase in other income, net for the quarter and year ended December 31, 2020, as compared to the same periods in 2019, was primarily due to net unrealized and realized gains on our investments in privately-held companies and our investments in publicly-traded equity securities.

Income taxes. Income tax expense was $124.1 million for the year ended December 31, 2020, as compared to income tax benefit of $60.5 million for the same period in 2019. For the year ended December 31, 2019, the income tax benefit resulted primarily from the $800.0 million payment under our license agreement with Arena which caused us to incur a net loss before taxes. For the years ended December 31, 2020 and 2019, our effective income tax rates (ETR) were approximately 19 percent and 37 percent, respectively. Changes to the ETR for the years ended December 31, 2020 and 2019 were primarily due to tax credits, partially offset by non-deductible compensation, which decreased our tax expense for 2020 and increased our tax benefit for 2019.

Non-GAAP Earnings

Non-GAAP earnings is defined as net income (loss), adjusted for: (1) share-based compensation expense (including expenses relating to stock options, restricted stock units, share tracking awards, and our employee stock purchase plan); (2) unrealized gains on investments in privately-held companies; (3) impairments of investments in privately-held companies; (4) asset impairment charges; (5) license-related fees; (6) net changes in recurring fair value measurements; and (7) tax impact on non-GAAP earnings adjustments.

A reconciliation of net income (loss) to non-GAAP earnings is presented below (in millions, except per share data):

PRODUCT COMMERCIALIZATION UPDATE

In 2021, we plan to launch four new products and indications. In February 2021, we launched commercial sales of the Remunity Pump for Remodulin. In April 2021, we plan to launch a label expansion for Tyvaso, to include an indication for PH-ILD, assuming FDA approval. We also plan to launch the Implantable System for Remodulin and Tyvaso DPI, assuming the FDA grants the necessary clearances.

Remunity Pump for Remodulin. In February 2020, we announced FDA clearance of the pharmacy-filled version of the Remunity Pump for Remodulin, developed in collaboration with DEKA Research & Development Corp (DEKA). In February 2021, we announced the first commercial shipments of the Remunity Pump to specialty pharmacies. The Remunity Pump is a pre-filled, semi-disposable system for subcutaneous delivery of treprostinil, developed in collaboration with DEKA under an exclusive development and license agreement. The system consists of a small, lightweight, durable pump and controller designed to have a service life of at least three years. The pump uses disposable cartridges filled with Remodulin, which can be connected to the pump with less patient manipulation than is typically involved in filling other currently-available subcutaneous pumps.

Tyvaso Inhalation Solution in PH-ILD. In February 2020, we reported that the INCREASE study of Tyvaso in patients with PH-ILD met its primary endpoint of demonstrating improvement in six-minute walk distance (6MWD). Tyvaso also showed benefits across several key subgroups, including etiology of PH-ILD, disease severity, age, gender, baseline hemodynamics, and dose. Significant improvements were also observed in each of the study’s secondary endpoints, including reduction in the cardiac biomarker NT-proBNP, time to first clinical worsening event, change in peak 6MWD at week 12, and change in trough 6MWD at week 15. Treatment with Tyvaso of up to 12 breaths per session, four times daily, in the INCREASE study was well tolerated and the safety profile was consistent with previous Tyvaso studies and known prostacyclin-related adverse events. Comprehensive data from the INCREASE study were recently published in the New England Journal of Medicine.

In April 2020, the FDA indicated that the results of the INCREASE study appear to support our proposed indication of treatment of patients with PH-ILD to improve exercise ability and delay clinical worsening. In June 2020, we submitted an efficacy supplement (sNDA) to the Tyvaso new drug application (NDA), which we expect to result in revised labeling reflecting the outcome of the INCREASE study. In August 2020, the FDA accepted the sNDA for review, which we expect will be completed in April 2021.

Implantable System for Remodulin. Developed in collaboration with Medtronic, the premarket approval application (PMA) for the ISR was approved by the FDA in December 2017. However, our ability to launch the product is subject to Medtronic satisfying various conditions to its PMA approval. We are working with Medtronic to meet these conditions to the FDA’s satisfaction by the fourth quarter of 2021, with a goal of commencing launch activities during late 2021. Our ability to launch the ISR in 2021, or at all, depends on our ability to work with Medtronic to satisfy the FDA’s conditions and other factors, many of which are entirely outside our control.

Tyvaso DPI. We have completed two clinical studies of Tyvaso DPI. One was a study in healthy volunteers, comparing the pharmacokinetics of Tyvaso DPI to Tyvaso Inhalation Solution. We completed the study in October 2020, and announced in January 2021 that the study demonstrated comparable systemic treprostinil exposure between Tyvaso DPI and Tyvaso Inhalation Solution. In December 2020, we completed a clinical study (called BREEZE), which evaluated the safety and pharmacokinetics of switching pulmonary arterial hypertension (PAH) patients from Tyvaso Inhalation Solution to Tyvaso DPI. In January 2021, we announced that the study demonstrated safety and tolerability of Tyvaso DPI in subjects with PAH transitioning from Tyvaso Inhalation Solution. We are awaiting the final pharmacokinetics data from the BREEZE study. The FDA has indicated that these two studies will be the only additional clinical studies necessary to support FDA approval. If our pending sNDA for Tyvaso Inhalation Solution to treat PH-ILD is approved by the FDA in April 2021, we plan to submit an NDA later in April 2021 seeking an indication for Tyvaso DPI that includes both PAH and PH-ILD. In January 2021, we purchased a pediatric disease priority review voucher for $105.0 million, which we plan to redeem upon submission of the Tyvaso DPI NDA. The voucher is expected to reduce the typical 12-month timeframe for FDA to review the Tyvaso DPI NDA to eight months.

RESEARCH AND DEVELOPMENT UPDATE

Updates on selected later-stage programs are below.

Tyvaso in chronic fibrosing interstitial lung diseases — TETON. We are planning a new phase 3 program called TETON, which will be comprised of one or more phase 3 studies of Tyvaso in subjects with various forms of chronic fibrosing interstitial lung diseases, including patients with idiopathic interstitial pneumonias (IIP), chronic hypersensitivity pneumonitis (CHP), and environmental/occupational lung disease. The first TETON study is designed to enroll subjects with idiopathic pulmonary fibrosis (IPF). The primary endpoint of this study is planned to be the change in absolute forced vital capacity (FVC) from baseline to week 52.

The TETON program was prompted by data from the INCREASE study, which demonstrated improvements in certain key parameters of lung function in pulmonary hypertension patients with fibrotic lung disease. Specifically, in the INCREASE study, treatment with Tyvaso resulted in significant improvements in percent predicted FVC at weeks 8 and 16, with subjects having underlying etiologies of IIP showing greater improvement. Consistent positive effects were also observed in patients with CHP and environmental/occupational lung disease. These data points, combined with substantial preclinical evidence of antifibrotic activity of treprostinil, suggest that Tyvaso may offer a treatment option for patients with fibrotic lung disease.

In December 2020, the FDA granted orphan designation for treprostinil to treat IPF.

Tyvaso in pulmonary hypertension due to chronic obstructive pulmonary disease — PERFECT. Enrollment is ongoing for the phase 3 PERFECT study (NCT03496623) evaluating Tyvaso in patients with WHO Group 3 pulmonary hypertension associated with chronic obstructive pulmonary disease. In a 30-week crossover study, 136 subjects will be randomized between inhaled treprostinil and placebo for a 26-week treatment period. The primary endpoint of the study is the change in 6MWD from baseline to week 12.

Ralinepag phase 3 clinical studies — ADVANCE CAPACITY and ADVANCE OUTCOMES. We are enrolling two phase 3 clinical studies to support the potential approval of oral ralinepag for PAH.

Trevyent. We are developing Trevyent, a drug-device combination product that combines our two-day, single use, disposable PatchPump technology with treprostinil, for the subcutaneous treatment of PAH. We submitted a 505(b)(1) NDA for Trevyent to the FDA in June 2019. In April 2020, the FDA issued a complete response letter (CRL) related to our NDA indicating that some of the deficiencies previously raised by the FDA had not yet been addressed to its satisfaction. In January 2021, we met with the FDA to discuss certain deficiencies noted in the CRL, and our plans to address them. The FDA clarified certain matters and indicated that a small clinical study of Trevyent in PAH patients may be required to evaluate further the pharmacokinetic profile and safety as correlated to the pump performance. We are assessing the FDA’s comments and awaiting additional written feedback from the agency, but currently believe that resubmission of our NDA will likely be delayed to 2022. We anticipate a six-month review period by the FDA following our resubmission.

Unituxin in relapsed/refractory neuroblastoma — ANBL1221. We are pursuing an indication expansion for Unituxin in relapsed or refractory neuroblastoma based on the results of the Children’s Oncology Group’s ANBL1221 study (NCT01767194). We met with the FDA in April 2020 to discuss the proposed label expansion, and plan to file a supplemental BLA in the near term.

INDUCEMENT RESTRICTED STOCK UNITS

On February 19, 2021, we granted a total of 909 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 February 28, 2022, February 28, 2023, and February 28, 2024, 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 teleconference on Wednesday, February 24, 2021, at 9:00 a.m. Eastern Time. The teleconference is accessible by dialing +1 (866) 393-4306 in the United States, with international callers dialing +1 (763) 488-9145. A rebroadcast of the teleconference will be available for one week and can be accessed by dialing +1 (855) 859-2056 in the United States, with international callers dialing +1 (404) 537-3406, and using access code: 8999095.