Total revenues for the second quarter of 2010 were $137.5 million, up from $84.0 million for the second quarter of 2009. Net income for the second quarter of 2010 was $37.7 million or $0.67 per basic share, compared to a net loss of $(2.3) million, or $(0.04) per basic share, recognized for the second quarter of 2009. Gross margin from sales was $120.5 million for the second quarter of 2010, compared to $73.6 million for the second quarter of 2009. Earnings before non-cash charges, a non-GAAP financial measure(1), was $65.7 million for the second quarter of 2010, compared to $34.1 million for the second quarter of 2009.
"Our strong performance this quarter and for the first half of 2010 was highlighted by continued top-line growth," said Martine Rothblatt, Ph.D., United Therapeutics' Chairman and Chief Executive Officer. "These results, which were principally driven by the increase in demand for our therapies, affirm that the patient base benefitting from our medicines is expanding along the entire range of the pulmonary arterial hypertension continuum."
(1) See definition of earnings before non-cash charges and a reconciliation of earnings before non-cash charges to net income (loss) below.
Financial Results for the Three Months Ended June 30, 2010
Revenues
The following table sets forth the components of net revenues (dollars in thousands):
Three Months Ended | ||||||
2010 | 2009 | % Change | ||||
Cardiovascular products: | ||||||
Remodulin | $96,367 | $80,954 | 19.0% | |||
Tyvaso | 29,483 | 100.0% | ||||
Adcirca | 8,589 | 100.0% | ||||
Telemedicine services and products | 2,770 | 2,699 | 2.6% | |||
Other | 282 | 327 | (13.8)% | |||
Total net revenues | $137,491 | $83,980 | 63.7% | |||
The growth in revenues for the three months ended June 30, 2010, reflects primarily: (1) the continued increase in the number of patients being prescribed Remodulin; (2) the impact of the price increases for Remodulin worldwide that went into effect during the three months ended June 30, 2010; and (3) sales of Tyvaso and Adcirca, which were commercially launched during the third quarter of 2009.
Research and Development Expense
The table below summarizes research and development expense by major project and non-project component (dollars in thousands):
Three Months Ended | Percentage | ||||||
2010 | 2009 | Change | |||||
Project and non-project component: | |||||||
Cardiovascular | $18,619 | $13,105 | 42.1% | ||||
Share-based compensation | 1,420 | 8,933 | (84.1)% | ||||
Other | 8,905 | 6,608 | 34.8% | ||||
Total research and development expense | $28,944 | $28,646 | 1.0% | ||||
Cardiovascular. The increase in expenses related to our cardiovascular programs for the quarter ended June 30, 2010, compared to the same quarter in 2009, was driven largely by the following: (1) an increase in expenses associated with our FREEDOM-M and FREEDOM-C2 Phase III clinical trials; (2) an increase in expenses related to our efforts to develop beraprost-MR; and (3) milestone and research expenses for the development of a Type V Collagen oral solution.
Share-based compensation. The decrease in share-based compensation for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 resulted largely from the decline in the price of our common stock at June 30, 2010 when compared to March 31, 2010.
Selling, General and Administrative Expense
The table below summarizes selling, general and administrative expense by major category (dollars in thousands):
Three Months Ended | Percentage | |||||
2010 | 2009 | Change | ||||
Category: | ||||||
General and administrative | $19,208 | $12,960 | 48.2% | |||
Sales and marketing | 13,828 | 11,049 | 25.2% | |||
Share-based compensation | (2,000) | 25,362 | (107.9)% | |||
Total selling, general and administrative expense | $31,036 | $49,371 | (37.1)% | |||
General and administrative. The increase in general and administrative expenses for the quarter ended June 30, 2010, compared to the same quarter in 2009, resulted in large part from increases in the following: (1) state franchise taxes; (2) professional fees and expenses pertaining mainly to legal services provided in connection with ongoing litigation and prospective transactions; (3) grants to unaffiliated, not-for-profit organizations that provide therapy-related financial assistance to patients suffering from pulmonary arterial hypertension; and (4) depreciation expense primarily associated with our new facilities in North Carolina and Maryland.
Sales and marketing. The increase in sales and marketing expenses corresponded primarily to marketing and related expenses incurred in connection with the recent commercialization of Tyvaso and Adcirca.
Share-based compensation. The decrease in share-based compensation for the three months ended June 30, 2010 compared to the same quarter in 2009 resulted primarily from the decline in the price of our common stock at June 30, 2010 when compared to March 31, 2010.
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) non-cash license fee expenses; (4) depreciation and amortization; (5) impairment charges; and (6) share-based compensation (stock option and share tracking award expense).
The following table provides a reconciliation of net income to earnings before non-cash charges for each of the three-month periods ended June 30, 2010 and 2009 (in thousands, except per share data):
Three Months Ended | ||||||
2010 | 2009 | |||||
Net income (loss), as reported | $37,707 | $(2,344) | ||||
Adjust for non-cash charges: | ||||||
Interest expense | 4,759 | 3,248 | ||||
Income tax expense (benefit) | 19,212 | (3,199) | ||||
License fees | ||||||
Depreciation and amortization | 4,582 | 2,403 | ||||
Impairment charges | ||||||
Share-based compensation | (574) | 33,960 | ||||
Earnings before non-cash charges | 65,686 | |||||
