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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
------------------------ ------------------------
Commission file number 333-76409
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United Therapeutics Corporation
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 52-1984749
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
1110 Spring Street, Silver Spring, MD 20910
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (301) 608-9292
-----------------------------
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check X whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date 15,901,967
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INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION (UNAUDITED) Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31,
------------- ------------
(Unaudited) 1998
----
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 4,454,995 $ 6,779,067
Investments 53,042,635 10,023,190
Accounts receivable 164,428 53,750
Prepaid expense 106,743 -
---------- -----------
Total current assets 57,768,801 16,856,007
Property, plant, and equipment, net 1,592,289 1,367,508
Certificate of deposit 524,187 509,506
Other 37,416 13,817
---------- -----------
Total assets $ 59,922,693 $ 18,746,838
========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 740,987 $ 1,707,103
Accrued professional fees 157,492 14,161
Payroll taxes withheld 17,443 33,629
Current portion of note payable 8,056 4,098
---------- -----------
Total current liabilities 923,978 1,758,991
Note payable, excluding current portion 712,286 310,262
Other liabilities 12,337 1,759
---------- -----------
Total liabilities 1,648,601 2,071,012
========== ===========
Stockholders equity:
Preferred stock, par value $.01, 10,000,000 shares - -
authorized at June 30, 1999 and December 31, 1998, no
shares issued
Common stock, par value $.01, 100,000,000 and 152,270 101,156
50,000,000 shares authorized at June 30, 1999 and
December 31, 1998, 15,226,967 and 10,115,597 shares
issued and outstanding at June 30, 1999 and December 31,
1998
Additional paid-in capital 92,213,632 32,341,370
Accumulated deficit (34,091,810) (15,766,700)
---------- ----------
Total stockholders' equity 58,274,092 16,675,826
---------- -----------
Total liabilities and stockholders' equity $ 59,922,693 $ 18,746,838
========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
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UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Grant revenue $ 53,750 $ - $ 107,500 $ -
Operating expenses:
Research and development 5,194,949 1,090,536 16,806,407 2,830,219
General and administrative 1,123,712 627,984 1,971,661 1,200,772
--------- --------- --------- ---------
Total operating expenses 6,318,661 1,718,520 18,778,068 4,030,991
--------- --------- --------- ---------
Loss from operations (6,264,911) (1,718,520) (18,670,568) (4,030,991)
Other income (expense):
Interest income 185,089 78,343 363,179 130,069
Interest expense (7,295) (3,882) (14,267) (3,882)
--------- --------- --------- ---------
Total other income 177,794 74,461 348,912 126,187
--------- --------- --------- ---------
Net loss before income tax (6,087,117) (1,644,059) (18,321,656) (3,904,804)
Income tax - - (3,454) (2,855)
--------- --------- ---------- ---------
Net loss $ (6,087,117) $ (1,644,059) $(18,325,110) $ (3,907,659)
========= ========= ========== =========
Net loss per common share -
basic and diluted $ (0.53) $ (.20) $ (1.69) $ (.55)
========= ========= ========== =========
Weighted average number of
common shares outstanding -
basic and diluted 11,419,275 8,103,045 10,845,023 7,061,717
========== ========= ========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
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UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (18,325,110) $ (3,907,659)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 48,655 13,228
Stock issued for exclusive license agreement 9,000,000 -
Stock and options issued in exchange for services 44,290 103,585
Amortization of discount on investments (194,489) -
Changes in operating assets and liabilities:
Accounts receivable (110,678) (5,661)
Prepaid expenses (106,743) -
Other assets (23,599) (4,494)
Accounts payable (967,965) (71,325)
Accrued professional fees 143,331 8,912
Payroll taxes withheld (16,186) (27,360)
----------- ----------
Net cash used in operating activities (10,508,494) (3,890,774)
Cash flows used in investing activities:
Purchases of property, plant, and equipment (256,807) (763,173)
Purchases of investments and certificate of deposit (75,012,637) -
Sales and maturities of investments 32,173,000 -
----------- ----------
Net cash used in investing activities (43,096,444) (763,173)
Cash flows from financing activities:
Proceeds from issuance of common stock 50,879,086 6,621,130
Payments of principal of note payable (314,018) (840)
Proceeds from note payable 720,000 317,130
Principal payments under capital lease obligations (4,202) (670)
----------- ----------
Net cash provided by financing activities 51,280,866 6,936,750
Net increase (decrease) in cash and cash equivalents (2,324,072) 2,282,803
Cash and cash equivalents, beginning of period 6,779,067 5,018,145
----------- ----------
Cash and cash equivalents, end of period $ 4,454,995 $ 7,300,948
=========== ==========
Supplemental schedule of cash flow information -
cash paid for interest $ 14,267 $ 4,022
=========== ==========
Noncash investing and financing activities -
equipment acquired under a capital lease $ 16,629 $ -
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
1. ORGANIZATION AND BUSINESS DESCRIPTION
United Therapeutics Corporation (United Therapeutics) was incorporated
on June 26, 1996 under the laws of the State of Delaware. United
Therapeutics is a pharmaceutical company based in Silver Spring, Maryland
and Research Triangle Park, North Carolina, that is focused on clinical
development and commercialization of in-licensed compounds for the
treatment of life threatening diseases characterized by high chronic care
costs. The current focus of United Therapeutics is the development of
therapies to treat patients with pulmonary hypertension, a generally fatal
disorder of the pulmonary arteries with no adequate long-term therapies,
and peripheral vascular disease, a limb-threatening disorder affecting
millions of Americans. All of United Therapeutics' products are currently
in clinical trial programs.
United Therapeutics has three wholly owned subsidiaries: Lung Rx,
Inc., Unither Pharmaceuticals, Inc., and Unither Telemedicine Services
Corporation.
2. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared, without audit, pursuant to Regulation S-X of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto contained in United Therapeutics' Registration
Statement on Form S-1 dated June 17, 1999, as filed with the Securities and
Exchange Commission.
In the opinion of United Therapeutics' management, any adjustments
contained in the accompanying unaudited consolidated financial statements
are of a normal recurring nature, necessary to present fairly its financial
position as of June 30, 1999 and its results of operations for the three
and six month periods ended June 30, 1999 and 1998 and cash flows for the
six month periods ended June 30, 1999 and 1998. Interim results are not
necessarily indicative of results for an entire year.
3. INVESTMENTS
Investments at June 30, 1999 consist of marketable debt securities
that have remaining maturities of six months or less.
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4. REFINANCING OF NOTE PAYABLE
In June 1999, United Therapeutics refinanced its note payable. The
outstanding principal totalled approximately $315,000 and was paid in full
from the proceeds of a new note payable. The new note payable was issued
for $720,000 and is payable in monthly installments. This 30-year
adjustable rate note had an interest rate of 6.25 percent in effect at June
30, 1999 and is secured by the building and property owned by United
Therapeutics located at 1110 Spring Street in Silver Spring, Maryland.
5. STOCKHOLDERS' EQUITY
During the six month period ended June 30, 1999, the following events
and transactions impacted stockholders' equity:
(a) Private Placements of Common Stock
----------------------------------
During the first quarter of 1999, United Therapeutics sold 111,370
shares of common stock at a price of $18.00 per share through private
placements. Total proceeds from these private placements, net of offering
expenses, approximated $2.0 million.
(b) Issuance of Common Stock for License
------------------------------------
In March 1999, United Therapeutics issued 500,000 shares of common
stock in exchange for an exclusive license agreement. The stock was valued
at $9.0 million ($18.00 per share) based on recent sales at $18.00 per
share. The total of $9.0 million was expensed as research and development
in the first quarter of 1999.
(c) Reverse Stock Split
-------------------
In April 1999, United Therapeutics' Board of Directors approved a
one-for-three reverse stock split of its outstanding common stock.
Shareholders of United Therapeutics subsequently approved the reverse split
that was effected on June 11, 1999, prior to the public offering.
Fractional shares were not issued and no consideration was given for
fractional shares. Authorized shares and the par values of common and
preferred stock were not affected by the reverse stock split, although at
the same time United Therapeutics increased the total number of authorized
shares of common stock to 100,000,000. All share and per share amounts in
the accompanying financial statements have been retroactively adjusted to
reflect the reverse stock split for all periods presented.
(d) Initial Public Offering
-----------------------
On June 17, 1999, United Therapeutics' initial public offering, which
involved the sale of 4,500,000 shares of common stock at $12.00 per share,
was declared effective by the SEC. United Therapeutics closed the initial
public offering on June 22, 1999 and
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received net proceeds, after deducting underwriting commissions and
offering expenses, of approximately $48.9 million.
6. SUBSEQUENT EVENTS
On July 13, 1999, the underwriters exercised their over-allotment
option to purchase 675,000 shares of United Therapeutics' common stock at
the initial public offering price of $12.00 per share. The net proceeds to
United Therapeutics of the over-allotment option exercise, after
underwriting commissions and offering expenses, were approximately $7.5
million.
On July 22, 1999, Unither Telemedicine Services Corporation (UTSC)
entered into an agreement to form AboveCable.com, Inc., a Delaware
corporation, to provide Internet access via cable television portals
worldwide. UTSC will receive 20 percent of the initial outstanding common
stock in AboveCable.com, Inc. and the exclusive rights to offer
telemedicine and electronic health services at the portal level. United
Therapeutics has agreed to provide the services of its Chief Executive
Officer as Vice Chair and a director of the new company. The agreement does
not require UTSC to contribute cash or other capital. WorldSpace
Corporation purchased a 50 percent shareholding in the new company. The
Chairman and CEO of WorldSpace is a major shareholder and Board member of
United Therapeutics.
In August 1999, United Therapeutics agreed to purchase a building in
Silver Spring, Maryland for $1.5 million for an expansion of its
headquarters. The closing is scheduled for August 27, 1999. The majority of
the purchase price is expected to be financed with a 30-year adjustable
rate note from a bank.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the financial
statements and related notes appearing in the United Therapeutics' Registration
Statement dated June 17, 1999. The following discussion contains forward-looking
statements concerning the financing of the expansion of United Therapeutics'
headquarters, the cash needed for current research and development contract
obligations through the end of 1999, the adequacy of United Therapeutics'
resources to fund operations through 2002 and the anticipated success and costs
of United Therapeutics efforts to become Year 2000 compliant. These
forward-looking statements reflect the plans and estimated beliefs of
management. Actual results could differ materially from those anticipated in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and the ability of United Therapeutics
to obtain the bank financing for the building, the accuracy of the company's
assumptions concerning its contract research needs and unexpected developments
in the company's Year 2000 efforts.
OVERVIEW
United Therapeutics develops pharmaceuticals to treat vascular diseases
including pulmonary hypertension and peripheral vascular disease, as well as
selected other chronic conditions. United Therapeutics commenced operations in
June 1996 and, since its inception, has devoted substantially all of its
resources to its research and development programs. United
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Therapeutics has generated no product revenues and has funded its operations
primarily from the proceeds of private placements of its equity securities.
United Therapeutics operates with a minimal number of employees and has
contracted with qualified third parties for substantially all pharmaceutical
development activities, including drug manufacturing and certain key aspects of
clinical trials.
United Therapeutics has incurred net losses each year since inception and
had an accumulated deficit of $34.1 million at June 30, 1999. United
Therapeutics expects to continue to incur net losses and cannot provide
assurances that, in the future, it will have product sales or become profitable.
United Therapeutics has contracted with various companies and research
organizations to coordinate and perform clinical trials and to provide other
activities related to the development of its lead product, UT-15, and other
products. It is anticipated that $8.0 million in cash will be used for the
remainder of 1999 under these agreements. These expenses will be funded from
existing working capital.
FINANCIAL POSITION
On June 17, 1999, United Therapeutics completed an initial public offering
of 4.5 million shares of common stock at $12.00 per share. The offering closed
on June 22, 1999 and United Therapeutics received net proceeds, after deducting
underwriting commissions and offering expenses, of approximately $48.9 million.
Investments in marketable debt securities at June 30, 1999 were $53.0
million as compared to $10.0 million at December 31, 1998. The increase of
approximately $43.0 million is due to receipt of the net proceeds from the
initial public offering, less amounts used for operations during the six months
ended June 30, 1999.
Accounts payable at June 30, 1999 were $741,000 as compared to $1.7 million
at December 31, 1998. This decrease in accounts payable is due to payments made
to vendors in June 1999. The note payable as of June 30, 1999 totalled $720,000
as compared to $314,000 as of December 31, 1998. A new mortgage note payable was
issued in June 1999 for $720,000, the proceeds from which were used to pay off
the original note payable. The new mortgage note is secured by the building and
property owned by United Therapeutics located at 1110 Spring Street in Silver
Spring, Maryland.
Common stock and additional paid-in capital at June 30, 1999 increased as
compared to amounts at December 31, 1998. This increase of approximately $59.9
million was due to the net proceeds of the initial public offering of $48.9
million, sales of common stock through private placements prior to commencement
of the initial public offering totaling $2.0 million, and stock issued in
exchange for an exclusive license agreement totaling $9.0 million.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Revenue for the three months ended June 30, 1999 was approximately $54,000
as compared to none for the corresponding period in 1998. This revenue was
earned under an "orphan drug" grant awarded by the FDA related to United
Therapeutics' development of UT-15 for the treatment of primary pulmonary
hypertension. The FDA may designate a product as an "orphan drug" if the drug is
one intended to treat a rare disease or condition and has done so with respect
to UT-15.
Research and development expenses consist primarily of costs to acquire
pharmaceutical products for development and amounts paid to contract research
organizations, hospitals and laboratories for the provision of services and
materials for drug development and clinical trials. Research and development
expenses were $5.2 million for the three months ended June 30, 1999, as compared
to $1.1 million for the three months ended June 30, 1998. Approximately $3.9
million of the increase in research and development expenses is related to
increased levels of patient enrollment in United Therapeutics' Phase III
clinical trials of UT-15. Additionally, approximately $225,000 of the increase
is related to the development of technology-based products by Unither
Telemedicine Services Corporation.
General and administrative expenses consist primarily of personnel
salaries, office expenses and professional fees. General and administrative
expenses were $1.1 million for the three months ended June 30, 1999, as compared
to $628,000 for the three months ended June 30, 1998. This increase was due
primarily to increased staffing to support expanded operations.
Interest income for the three months ended June 30, 1999 was $185,000, as
compared to $78,000 for the three months ended June 30, 1998. This increase was
attributable to an increase in the amount of cash available for investing
resulting from sales of common stock totaling approximately $20.5 million during
the last three quarters of 1998, $2.0 million during the first quarter of 1999,
and $48.9 million during the second quarter of 1999, less amounts used for
operations during these periods.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Revenue for the six months ended June 30, 1999 was approximately $108,000,
as compared to none for the corresponding period in 1998. This revenue was
earned under the "orphan drug" grant awarded by the FDA related to United
Therapeutics' development of UT-15 for the treatment of primary pulmonary
hypertension.
Research and development expenses consist primarily of costs to acquire
pharmaceutical products for development and amounts paid to contract research
organizations, hospitals and laboratories for the provision of services and
materials for drug development and clinical trials. Research and development
expenses were $16.8 million for the six months ended June 30, 1999, as compared
to $2.8 million for the six months ended June 30, 1998. Approximately $4.9
million
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of the increase in research and development expenses is related to increased
levels of patient enrollment in United Therapeutics' Phase III clinical trials
of UT-15. Additionally, $9.1 million of the increase is related to the payment
of an up-front licensing fee consisting of common stock valued at $9.0 million
and $100,000 in cash to obtain the exclusive rights to develop beraprost, an
oral form of prostacyclin, to treat peripheral vascular disease in the United
States and Canada.
General and administrative expenses consist primarily of personnel
salaries, office expenses and professional fees. General and administrative
expenses were $2.0 million for the six months ended June 30, 1999, as compared
to $1.2 million for the six months ended June 30, 1998. This increase was due
primarily to increased staffing and related expenses to support expanded
operations.
Interest income for the six months ended June 30, 1999 was $363,000, as
compared to $130,000 for the six months ended June 30, 1998. This increase was
attributable to an increase in the amount of cash available for investing
resulting from sales of common stock totaling approximately $20.5 million during
the last three quarters of 1998, $2.0 million during the first quarter of 1999,
and $48.9 million during the second quarter of 1999, less amounts used for
operations during these periods.
LIQUIDITY AND CAPITAL RESOURCES
Until June 1999, United Therapeutics financed its operations principally
through various private placements of common stock. On June 17, 1999, United
Therapeutics completed an initial public offering of 4.5 million shares of
common stock at $12.00 per share. Net proceeds to United Therapeutics, after
deducting underwriting commissions and offering expenses, were approximately
$48.9 million.
United Therapeutics' working capital at June 30, 1999 was $56.8 million, as
compared with $15.1 million at December 31, 1998. Current liabilities at June
30, 1999 were approximately $924,000, as compared with $1.8 million at December
31, 1998. United Therapeutics' debt at June 30, 1999 was approximately $720,000,
as compared with $314,000 at December 31, 1998, and consisted of a note secured
by the building and property owned by United Therapeutics located at 1110 Spring
Street in Silver Spring, Maryland and due in monthly installments over 30 years.
In August 1999, United Therapeutics agreed to purchase a building in Silver
Spring, Maryland for $1.5 million for an expansion of its headquarters. The
closing is scheduled for August 27, 1999. The majority of the purchase price is
expected to be financed with a 30-year adjustable rate note from a bank.
Net cash used in operating activities was approximately $10.5 million and
$3.9 million for the six months ended June 30, 1999 and 1998, respectively. The
increase resulted from the expansion of United Therapeutics' operations,
particularly with respect to increased costs for the UT-15 trials. For the six
months ended June 30, 1999 and 1998, United Therapeutics invested approximately
$257,000 and $763,000, respectively, in cash for property, plant, and equipment.
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Net cash provided by financing activities was approximately $51.3 million and
$6.9 million for the six months ended June 30, 1999 and 1998. Cash flows from
financing activities for the six months ended June 30, 1999 were derived from
the initial public offering in June and private equity financings in the first
quarter. Cash flows from financing activities for the six months ended June 30,
1998 were derived from private equity financings during the period.
United Therapeutics has contracted with various companies and research
organizations to coordinate and perform clinical trials and to provide other
activities related to the development of UT-15 and other products. It is
anticipated that $8.0 million in cash will be used for the remainder of 1999
under these agreements. These expenses will be funded from existing working
capital. United Therapeutics does not expect to make any milestone or royalty
payments during 1999.
United Therapeutics expects that existing capital resources will be
adequate to fund its operations through 2002. United Therapeutics' future
capital requirements and the adequacy of its available funds will depend on many
factors, including:
- Regulatory approval of UT-15 and beraprost;
- Size and scope of its development efforts for additional products;
- Cost, timing and outcomes of regulatory reviews;
- Rate of technological advances;
- Determinations as to the commercial potential of United Therapeutics'
products under development;
- Status of competitive products;
- Defending and enforcing intellectual property rights;
- Establishment, continuation or termination of third-party manufacturing
arrangements;
- Development of sales and marketing resources or the establishment,
continuation or termination of third-party manufacturing arrangements;
- Development of sales and marketing resources or the establishment,
continuation or termination of third-party sales and marketing
arrangements;
- Establishment of additional strategic or licensing arrangements with other
companies; and
- Availability of other financing opportunities.
As of December 31, 1998, United Therapeutics had available approximately
$10.0 million in net operating loss carryforwards and $3.6 million in business
tax credit carryforwards for federal income tax purposes which expire at various
dates through 2018. As of June 30, 1999, United Therapeutics had available
approximately $26.3 million in net operating loss carryforwards and $6.8 million
in business tax credit carryforwards. As a result of past financings and the
initial public offering, United Therapeutics has not experienced ownership
changes as defined by rules enacted with the Tax Reform Act of 1986 that would
limit United Therapeutics' ability to use its net operating loss and tax credit
carryforwards.
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YEAR 2000
United Therapeutics uses a number of computer software programs and
operating systems in its internal operations, including applications used in
financial business systems and various administrative functions. To the extent
that these software applications, and the software applications of United
Therapeutics' vendors, suppliers, financial institutions and service providers,
contain source code that is unable to appropriately interpret the upcoming
calendar year 2000, some level of modification or even possibly replacement of
such source code or applications will be necessary.
United Therapeutics has identified the software applications that are not
Year 2000 compliant. United Therapeutics anticipates its Year 2000 remediation
efforts will be completed in the third quarter of 1999 and expects to incur
expenses of up to $100,000 to complete its remediation efforts.
United Therapeutics has contacted all of its major vendors, suppliers,
financial institutions and service providers to ensure they are Year 2000
compliant. Key third party vendors have been asked to certify in writing that
their software or systems are Year 2000 compliant. United Therapeutics has
confirmed with MiniMed that the microinfusion devices used to deliver its key
drug, UT-15, to patients have been tested and are Year 2000 compliant.
United Therapeutics believes its worst case scenario relating to Year 2000
risks includes a power interruption and a lack of pharmaceutical products to
support clinical trials. United Therapeutics is implementing a contingency plan
to cover this situation by building up inventories of its drug products to
sustain its studies for 12 months and has purchased a generator to deal with
power failures.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." United Therapeutics is required to adopt
SFAS No. 133, as amended, for fiscal quarters beginning after June 15, 2000.
SFAS No. 133 established methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as other
hedging activities. Because United Therapeutics holds no derivative financial
instruments and does not engage in hedging activities, adoption of SFAS No. 133
is not expected to have a material impact on United Therapeutics' financial
condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. United Therapeutics is required to implement SOP
98-1 for the year ending December 31, 1999. Adoption of SOP 98-1 is not expected
to have a material impact on United Therapeutics' financial condition or results
of operations.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
12
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Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) On June 11, 1999, prior to the public offering, United Therapeutics
effected a one-for-three reverse stock split of its common stock. Fractional
shares were not issued and no consideration was given for fractional shares.
Authorized shares and the par values of common and preferred stock were not
affected by the reverse stock split.
(d) United Therapeutics registered 4,500,000 shares of its common stock,
par value $.01 per share, and an additional 675,000 shares of its common stock
for sale to the underwriters exclusively to cover over-allotments, on
Registration Statement on Form S-1, Commission File No. 333-76409. Deutsche Banc
Alex. Brown acted as lead manager of the underwriting. A.G. Edwards & Sons, Inc.
and Vector Securities International, Inc. acted as co-managers. The Securities
and Exchange Commission declared United Therapeutics' registration statement
effective on June 17, 1999.
United Therapeutics closed the sale of 4,500,000 shares on June 22, 1999.
On July 13, 1999, the underwriters exercised their option to purchase the
over-allotment shares and on July 16, 1999 United Therapeutics closed the sale
of the 675,000 over-allotment shares. The aggregate price of the offering amount
registered, including the over-allotment shares, was $86,250,000 and the
aggregate offering price of the amount sold, including the over-allotment
shares, was $62,100,000. The offering is now terminated.
From June 17, 1999 to June 30, 1999, the amount of expenses incurred by
United Therapeutics due to underwriting discounts and commissions, finders' fees
and expenses paid to or for underwriters for the sale of the 4,500,000 shares
was $3,780,000 and a reasonable estimate of other expenses incurred by United
Therapeutics is $20,300. Of the $20,300 in other expenses incurred,
approximately $1,800 was paid to Mahon Patusky Rothblatt & Fisher, Chartered, a
law firm for which the Chief Executive Officer of United Therapeutics serves as
Of Counsel. The net proceeds to United Therapeutics from the offering of the
4,500,000 shares, after deducting the total expenses described above and
expenses incurred prior to the effectiveness of the registration statement, was
approximately $48.9 million.
On July 13, 1999, the underwriters exercised their option to purchase the
675,000 over-allotment shares. The amount of expenses incurred by United
Therapeutics due to underwriting discounts and commissions, finders' fees and
expenses paid to or for underwriters for the over-allotment shares was $567,000
and a reasonable estimate of other expenses incurred by United Therapeutics is
$7,500. The net proceeds to United Therapeutics from the sale of the 675,000
over-allotment shares, after deducting the total expenses described
above, was approximately $7,525,000.
From June 17, 1999 to June 30, 1999, United Therapeutics temporarily
invested all the proceeds from the offering of the 4,500,000 shares in
marketable debt securities.
13
<PAGE> 16
United Therapeutics temporarily invested approximately $6.5 million of the
proceeds from the sale of the 675,000 over-allotment shares in marketable debt
securities and approximately $1.0 million of the proceeds in money market funds.
Item 4. Submission of Matters to a Vote of Security Holders
On April 8, 1999, pursuant to Section 228 of the Delaware General
Corporation Law, shareholders who beneficially owned approximately 53% of the
then outstanding common stock took action by written consent in lieu of a
meeting. The shareholders, contingent upon the consummation of the initial
public offering, approved and adopted United Therapeutics' Amended and Restated
Certificate of Incorporation, which among other things effectuated a
one-for-three reverse split of its common stock and increased the authorized
capital to 100,000,000 shares of common stock. Pursuant to the same written
consent, the shareholders approved and adopted the United Therapeutics Amended
and Restated Equity Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 of
Registration Statement on Form S-1, File No. 333-76409).
3.2 Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.2 of Registration Statement on Form S-1,
File No. 333-76409).
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED THERAPEUTICS CORPORATION
Date: August 16, 1999 /s/ Martine A. Rothblatt
----------------------------------------
By: Martine A. Rothblatt
Title: Chief Executive Officer
/s/ Gilles Cloutier
----------------------------------------
By: Gilles Cloutier, Ph.D.
Title: Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,455
<SECURITIES> 53,043
<RECEIVABLES> 164
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,769
<PP&E> 1,691
<DEPRECIATION> 99
<TOTAL-ASSETS> 59,923
<CURRENT-LIABILITIES> 924
<BONDS> 720
0
0
<COMMON> 152
<OTHER-SE> 58,122
<TOTAL-LIABILITY-AND-EQUITY> 58,274
<SALES> 108
<TOTAL-REVENUES> 108
<CGS> 0
<TOTAL-COSTS> 18,778
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<INTEREST-EXPENSE> 14
<INCOME-PRETAX> (18,322)
<INCOME-TAX> 3
<INCOME-CONTINUING> (18,325)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,325)
<EPS-BASIC> (1.69)
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