On May 1, 2019 United Therapeutics Corporation (Nasdaq: UTHR) reported its financial results for the quarter ended March 31, 2019 (Press release, United Therapeutics, MAY 1, 2019, View Source [SID1234535560]).

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"I’m very pleased to report that last quarter we helped more pulmonary arterial hypertension (PAH) patients with our Remodulin, Tyvaso and Orenitram medicines than ever before," said Martine Rothblatt, Ph.D., Chairman and Chief Executive Officer of United Therapeutics. "While we did also experience the disappointment of being unable to prove a morbidity/mortality benefit of esuberaprost in our BEAT phase III trial, it is of course the nature of science that hypotheses are disproven as well as proven. No string of successes is without its setbacks, and we are confident of positive results being proven amongst our many other pivotal studies including the DISTINCT study of dinutuximab for small cell lung cancer, the INCREASE study of Tyvaso in pulmonary hypertension (PH) associated with interstitial lung disease, the PERFECT study of Tyvaso in PH associated with COPD, the SOUTHPAW study of Orenitram in PH associated with heart failure, the ADVANCE OUTCOMES study of ralinepag in PAH, the SAPPHIRE study of autologous gene therapy in PAH and our lung transplantation study."

Revenues for the three months ended March 31, 2019 decreased by $26.6 million as compared to the same period in 2018.

Remodulin net product sales for the three months ended March 31, 2019 increased by $28.7 million as compared to the same period in 2018. U.S. Remodulin net product sales increased by $18.8 million, primarily due to an increase in the number of patients being treated with Remodulin and a price increase implemented in April 2018, which was the first price increase for Remodulin since 2010. International Remodulin net product sales increased by $9.9 million, primarily due to an increase in quantities shipped to international distributors.

Tyvaso net product sales for the three months ended March 31, 2019 increased by $9.2 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 Tyvaso and a price increase implemented in January 2019.

Orenitram net product sales for the three months ended March 31, 2019 increased by $6.2 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 March 31, 2019 increased by $6.9 million as compared to the same period in 2018. This increase was primarily due to an increase in the number of vials sold.

Adcirca net product sales for the three months ended March 31, 2019 decreased by $77.6 million as compared to the same period in 2018. This decrease was due to a decrease in bottles sold following the onset of generic competition for Adcirca beginning in August 2018.

Refer to Share-based compensation below for discussion.

Cost of product sales, excluding share-based compensation. The decrease in cost of product sales of $31.1 million for the three months ended March 31, 2019, as compared to the same period in 2018, was primarily attributable to a $32.8 million decrease in royalty expense for Adcirca because fewer bottles were sold due to the onset of generic competition for Adcirca beginning in August 2018.

Research and development expense, excluding share-based compensation. The increase in research and development expense of $835.6 million for the three months ended March 31, 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 $829.2 million for the three months ended March 31, 2019, as compared to the same period in 2018, due to: (1) an $800.0 million upfront payment to Arena Pharmaceuticals under our license agreement related to ralinepag, and $8.9 million of expenditures associated with the phase III ADVANCE studies of ralinepag during the three months ended March 31, 2019; (2) a $12.5 million payment under our license and collaboration agreement with MannKind; (3) increased spending of $5.6 million on the development of drug delivery devices, including the Implantable System for Remodulin; and (4) increased spending on several clinical and non-clinical studies.

Share-based compensation. The increase in share-based compensation expense of $130.3 million for the three months ended March 31, 2019, as compared to the same period in 2018, was primarily due to: (1) a $126.0 million increase in STAP expense (benefit) driven by an 8% increase in our stock price for the three months ended March 31, 2019, as compared to a 24% decrease in our stock price for the same period in 2018; and (2) a $3.0 million increase in stock option expense due to additional awards granted and outstanding in 2019.

Income Tax (Benefit) Expense

The income tax benefit was $156.0 million for the three months ended March 31, 2019, as compared to income tax expense of $64.5 million for the same period in 2018. Our effective income tax rate (ETR) for the three months ended March 31, 2019 and

2018 was 24 percent and 21 percent, respectively. We recognized a loss before income taxes, and a corresponding income tax benefit, for the three months ended March 31, 2019, as a result of the one-time $800.0 million payment to Arena in January 2019. As a result of this loss, our anticipated tax credits, partially offset by non-deductible compensation expense, increase our tax benefit and resulting ETR for the three months ended March 31, 2019, compared to the three months ended March 31, 2018.

Non-GAAP Earnings

Non-GAAP earnings is defined as net income, 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) license-related fees; and (3) tax impact on non-GAAP earnings adjustments.

Conference Call

We will host a half-hour teleconference on Wednesday, May 1, 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: 5569533.

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