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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 September 30, 2000
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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 0-26301
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United Therapeutics Corporation
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(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 52-1984749
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(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
1110 Spring Street, Silver Spring, MD 20910
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(Address of Principal (Zip Code)
Executive Offices)
</TABLE>
(301) 608-9292
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Registrant's Telephone Number, Including Area Code
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark 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 X No
----- -----
The number of shares outstanding of the issuer's common stock, par value $.01
per share, as of November 8, 2000 was 20,184,768.
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INDEX
PAGE
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PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 12
Market Risk
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED THERAPEUTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
(UNAUDITED) DECEMBER 31, 1999
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<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 224,287,827 $ 18,279,883
Investments 14,256,455 33,315,914
Accounts receivable 581,969 362,268
Inventories 1,207,272 259,861
Prepaid expense 46,996 79,981
Other current assets 454,859 358,456
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Total current assets 240,835,378 52,656,363
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Property, plant and equipment, net 3,918,618 3,791,517
Certificate of deposit 563,253 539,545
Deferred offering costs - 159,418
Goodwill and other intangible assets, net 2,094,339 2,690,533
Investment in affiliate 4,782,635 -
Other 247,022 105,759
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Total assets $ 252,441,245 $ 59,943,135
============= =============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 3,328,785 $ 2,348,090
Accrued expenses 4,533,305 2,107,805
Payroll taxes withheld - 64,537
Current portion of notes and leases payable 29,247 56,786
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Total current liabilities 7,891,337 4,577,218
Notes and leases payable, excluding current portion 1,762,778 1,783,705
Other liabilities 13,823 16,662
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Total liabilities 9,667,938 6,377,585
Stockholders' equity:
Preferred stock, par value $.01, 10,000,000 shares - -
authorized, no shares issued
Common stock, par value $.01, 100,000,000 201,846 160,032
shares authorized, 20,184,561 and 16,003,218
shares issued and outstanding at September 30,
2000 and December 31, 1999, respectively
Additional paid-in capital 335,580,796 102,678,916
Accumulated deficit (93,009,335) (49,273,398)
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Total stockholders' equity 242,773,307 53,565,550
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Total liabilities and stockholders' equity $ 252,441,245 $ 59,943,135
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 353,891 $ - $ 1,109,591 $ -
Grant revenue 50,000 53,750 150,000 161,250
------------ ------------ ------------ ------------
Total revenues 403,891 53,750 1,259,591 161,250
------------ ------------ ------------ ------------
Operating expenses:
Research and development 8,135,688 5,977,408 42,848,352 22,783,815
General and administrative 2,426,571 1,232,747 7,924,105 3,204,408
Cost of sales 264,547 - 918,417 -
------------ ------------ ------------ ------------
Total operating expenses 10,826,806 7,210,155 51,690,874 25,988,223
------------ ------------ ------------ ------------
Loss from operations (10,422,915) (7,156,405) (50,431,283) (25,826,973)
Other income (expense):
Interest income 3,438,644 791,207 6,709,370 1,154,386
Interest expense (34,541) (12,674) (90,201) (26,941)
Other - net 4,789 17,895 76,178 17,895
------------ ------------ ------------ ------------
Total other income 3,408,892 796,428 6,695,347 1,145,340
------------ ------------ ------------ ------------
Net loss before income tax (7,014,023) (6,359,977) (43,735,936) (24,681,633)
Income tax - - - (3,454)
------------ ------------ ------------ ------------
Net loss $ (7,014,023) $ (6,359,977) $(43,735,936) $(24,685,087)
============ ============ ============ ============
Net loss per common share -
basic and diluted $ (0.35) $ (0.40) $ (2.32) $ (1.97)
============ ============ ============ ============
Weighted average number of
common shares outstanding -
basic and diluted 19,990,563 15,791,913 18,871,366 12,512,107
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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UNITED THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
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2000 1999
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Cash flows from operating activities:
Net loss $ (43,735,936) $ (24,685,087)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 691,028 86,740
Loss on disposals of equipment - 9,319
Stock issued for exclusive license agreement 18,770,000 9,000,000
Stock grant to Columbia University 749,967 -
Stock and options issued to employees and consultants 1,230,861 57,830
Amortization of discount on investments (766,540) (918,420)
Changes in operating assets and liabilities:
Accounts receivable (219,701) 41,702
Inventories (947,411) -
Prepaid expenses 32,985 (103,246)
Other current assets (96,403) -
Other assets (141,263) (61,730)
Accounts payable 980,695 453,580
Accrued expenses 2,425,500 79,906
Payroll taxes withheld (64,537) (13,571)
Other liabilities (2,839) 16,662
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Net cash used in operating activities (21,093,594) (16,036,315)
Cash flows from investing activities:
Purchases of property, plant, and equipment (362,856) (1,868,862)
Investment in Synergy Pharmaceuticals, Inc. (3,052,966) -
Purchases of investments and certificate of deposit (42,227,709) (100,818,444)
Sales and maturities of investments 62,030,000 57,874,000
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Net cash provided by (used in) investing activities 16,386,469 (44,813,306)
Cash flows from financing activities:
Proceeds from issuance of common stock 209,053,566 58,379,045
Principal payments on notes payable (16,374) (315,730)
Proceeds from the exercise of stock options 1,550,551 -
Proceeds from note payable - 1,798,000
Principal payments on capital lease obligations (32,092) (5,015)
Deferred offering costs 159,418 -
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Net cash provided by financing activities 210,715,069 59,856,300
Net increase (decrease) in cash and cash equivalents 206,007,944 (993,321)
Cash and cash equivalents, beginning of period 18,279,883 6,779,067
------------- -------------
Cash and cash equivalents, end of period $ 224,287,827 $ 5,785,746
============= =============
Supplemental schedule of cash flow information -
Cash paid for interest $ 90,201 $ 26,942
============= =============
Noncash investing and financing activities:
Stock issued for investment in affiliate $ 1,729,669 $ -
============= =============
Stock issued for exclusive license agreement $ 18,770,000 $ -
============= =============
Equipment acquired under a capital lease $ - $ 16,629
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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UNITED THERAPEUTICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 vascular,
inflammatory and infectious disease.
United Therapeutics has five wholly owned subsidiaries: Lung Rx, Inc.,
Unither Pharmaceuticals, Inc., Unither Telemedicine Services Corporation,
SynQuest, Inc. and United Therapeutics Europe Ltd.
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' Annual Report on Form 10-K
for the year ended December 31, 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 September 30, 2000 and
its results of operations for the three and nine month periods ended
September 30, 2000 and 1999 and its cash flows for the nine month
periods ended September 30, 2000 and 1999. Interim results are not
necessarily indicative of results for an entire year.
3. MARKETABLE INVESTMENTS
Investments at September 30, 2000 consist of a marketable debt
security maturing in December 2000.
4. INVESTMENT IN AFFILIATE AND EXCLUSIVE LICENSE AGREEMENTS
Synergy Pharmaceuticals, Inc.
In March 2000, Unither Pharmaceuticals, Inc. (Unither), a
wholly owned subsidiary of United Therapeutics, entered into a
license agreement with Synergy Pharmaceuticals, Inc. (Synergy) to
obtain from Synergy the exclusive worldwide rights to certain patents
relating to anti-viral compounds. Unither paid Synergy a $100,000
license fee which was expensed as research and development. The
agreement conditionally requires that Unither pay Synergy milestone
payments of up to $22.2 million for each FDA-approved product plus
royalties ranging from 6 percent to 12.25 percent, subject to
reductions, based on net sales. Additionally, Unither acquired 15
percent of the outstanding stock of Synergy for a total of $5
million. The purchase price was paid with $3.0 million in cash and
21,978 shares of common stock of United Therapeutics valued at
approximately $2.0 million. As part of these transactions, Unither
received an exclusive option to purchase the remaining stock of
Synergy at its fair value to be determined in the future in
accordance with the terms of the contract.
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At September 30, 2000, the investment in Synergy totaled
approximately $4.8 million. This investment is being accounted for
under the cost method.
Toray Industries, Inc.
In June 2000, United Therapeutics entered into an agreement
with Toray Industries, Inc. obtaining the exclusive right to develop
and market sustained release formulations of the oral prostacyclin
beraprost in the United States and Canada for the treatment of all
vascular indications (including cardiovascular indications). In
exchange, United Therapeutics paid Toray $1.0 million in cash and
200,000 shares of common stock of United Therapeutics valued at
approximately $18.8 million. In addition, United Therapeutics agreed
to grant Toray an option to purchase 500,000 shares of common stock
upon Toray's delivery of clinical trial material (expected in 2001)
with an exercise price based on the average of closing market prices
during the month preceding delivery of clinical trial material.
United Therapeutics also agreed to pay Toray milestone payments of up
to $750,000. License fees paid to Toray under this agreement and
expensed as research and development totaled $19,770,000 for the nine
month period ended September 30, 2000.
Pursuant to the agreement, United Therapeutics has agreed
to pay all costs and expenses associated with undertaking clinical
trials, obtaining regulatory approvals and commercializing sustained
release formulations of beraprost in the United States and Canada for
the treatment of vascular indications (including cardiovascular
indications). Toray has retained all manufacturing rights for
sustained release formulations of beraprost. United Therapeutics has
agreed to purchase sustained release formulations of beraprost solely
from Toray at specified prices based on volume. The agreement sets
forth a product development schedule. In the event that development
by United Therapeutics falls significantly behind the schedule
specified in the agreement, Toray may terminate the agreement.
Furthermore, United Therapeutics is responsible under the agreement
for achieving minimum annual product net sales as determined in
advance by mutual agreement, and in the case of the first two years
of commercial sales, minimum net sales of $2.5 million and $5
million, respectively. In the event that United Therapeutics is
unable to meet any minimum annual net sales requirement for two
consecutive years, Toray may convert the exclusive license to a
non-exclusive license. United Therapeutics would then be required to
share any product marketing rights approved by the FDA with a
third-party licensee chosen by Toray. The agreement expires 10 years
following FDA approval of beraprost for the particular disease
indication. United Therapeutics may extend the agreement for
unlimited 12 month periods with Toray's consent.
5. INVENTORIES
United Therapeutics manufactures certain compounds and
purchases medical supplies for use in its ongoing clinical trials.
These inventories are accounted for under the first-in, first-out
method. At September 30, 2000 and December 31, 1999, inventories
consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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<S> <C> <C>
UT-15 (in process) $ 875,747 $ 259,861
Medical supplies 301,510 -
Raw chemical materials 30,015 -
----------------- ---------------
$ 1,207,272 $ 259,861
================= ===============
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6. PRIVATE PLACEMENTS OF COMMON STOCK
In December 1999, United Therapeutics agreed to the sale of
2,500,000 shares of common stock at $32.00 per share in a private
placement. The private placement closed and settled in January 2000.
Net proceeds, after deducting commissions and offering expenses, were
approximately $74.8 million. The
7
<PAGE> 8
common stock was registered for resale with the SEC in a filing that was
declared effective on January 18, 2000.
In July 2000, United Therapeutics agreed to and closed on
the sale of 1,300,000 shares of common stock at $110.00 per share in
a private placement. Net proceeds, after deducting commissions and
certain offering expenses, were approximately $134.3 million. The
common stock was subsequently registered for resale with the SEC in a
filing that was declared effective on August 4, 2000.
7. ADVANCES TO EMPLOYEES
During the quarter ended June 30, 2000, United Therapeutics
advanced approximately $210,000 to three employees. These advances
are being repaid with interest of 8% over a period of up to nine
months. At September 30, 2000, total advances receivable from
employees were approximately $210,000 and are included in other
current assets in the accompanying consolidated balance sheets.
8. RECENT DEVELOPMENTS
On October 16, 2000, United Therapeutics filed the
remaining sections of its first New Drug Application (NDA) with the
U.S. Food and Drug Administration for the approval of its
prostacyclin analog known as UT-15 (with a pending trade name of
Uniprost) for the treatment of pulmonary hypertension. On October 19,
2000, United Therapeutics was informed by the FDA that six-month
priority review of the NDA had been granted. On November 3, 2000,
United Therapeutics was informed by the FDA that the UT-15 NDA had
been accepted for filing. On October 16, 2000, United Therapeutics
was informed that its synthesis and manufacturing subsidiary,
SynQuest, Inc., has successfully completed its FDA Pre-Approval
Inspection.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with
the consolidated financial statements and related notes appearing in
the United Therapeutics' Annual Report on Form 10-K for the year
ended December 31, 1999. The following discussion contains
forward-looking statements concerning the expectation of continued
losses, cash needed for current research and product development
contract obligations through the end of 2000, the funding for such
expenses, expectations concerning milestone and royalty payments in
2000, the use of net operating loss carryforwards and business tax
credit carryforwards, and the adequacy of United Therapeutics'
resources to fund operations through 2004. These forward-looking
statements reflect the plans and beliefs of management as of the date
of this report. 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 in the section "Risk Factors" in the prospectus which is a part
of Pre-Effective Amendment No. 2 to Form S-3 filed on August 4, 2000.
OVERVIEW
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 vascular,
inflammatory and infectious disease. 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 Therapeutics has generated no pharmaceutical product
revenues, but has generated grant revenues and revenues from its
manufacturing subsidiary and from the resale of certain medical
supplies. United Therapeutics has funded its operations primarily
from the proceeds of the sale 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 certain key aspects
of clinical trials.
8
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United Therapeutics has incurred net losses each year since
inception and had an accumulated deficit of $93.0 million at
September 30, 2000. United Therapeutics expects to continue to incur
net losses and cannot provide assurances that, in the future, it will
have pharmaceutical 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 products, UT-15 and beraprost, and other products. It is
anticipated that approximately $4.1 million in cash will be used for
the remainder of 2000 under these agreements. These expenses will be
funded from existing working capital.
FINANCIAL POSITION
On January 18, 2000, United Therapeutics closed a private
placement sale of 2.5 million shares of common stock at $32.00 per
share. United Therapeutics received net proceeds, after deducting
commissions and offering expenses, of approximately $74.8 million.
On July 20, 2000, United Therapeutics closed on the sale of
1.3 million shares of its common stock at $110.00 per share in a
private placement. Net proceeds, after deducting commissions and
offering expenses, were approximately $134.3 million.
Cash, cash equivalents and short-term investments at
September 30, 2000 were $238.5 million as compared to $51.6 million
at December 31, 1999. The increase of approximately $186.9 million is
due to receipt of the net proceeds from the private placement sales
of common stock which closed in January 2000 and July 2000, less
amounts used in operations during the nine month period ended
September 30, 2000.
Common stock and additional paid-in capital at September
30, 2000 increased as compared to amounts at December 31, 1999. This
increase of approximately $232.9 million was due primarily to the net
proceeds from the private placement sales of common stock which
closed in January 2000 and July 2000 and the issuance of 200,000
shares of common stock valued at approximately $18.8 million in
exchange for an exclusive license agreement in June 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues for the three months ended September 30, 2000 were
approximately $404,000, as compared to $54,000 for the three months
ended September 30, 1999. Approximately $50,000 of these revenues 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. The FDA may designate a product as an
"orphan drug" if the drug is one intended to treat a rare disease or
condition. Approximately $193,000 of these revenues was earned by
SynQuest, United Therapeutics' wholly owned subsidiary, for the
synthesis and manufacture of complex molecules for third parties.
Finally, approximately $110,000 of these revenues was earned from the
resale of pumps and supplies to distributors in connection with
United Therapeutics' lead product, UT-15.
Research and development expenses consist primarily of
costs to acquire pharmaceutical products and product rights 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 $8.1 million for the three months ended
September 30, 2000, as compared to $6.0 million for the three months
ended September 30, 1999. The increase of approximately $2.1 million
was due primarily to increased expenses of approximately $1.8 million
related to patient enrollment
9
<PAGE> 10
in United Therapeutics' clinical trials and increased expenses of approximately
$247,000 related to other research.
General and administrative expenses consist primarily of
salaries, office expenses and professional fees. General and
administrative expenses were $2.4 million for the three months ended
September 30, 2000, as compared to $1.2 million for the three months
ended September 30, 1999. This increase of approximately $1.2 million
was due primarily to increased staffing and related travel to support
expanded operations and increased professional fees.
Interest income for the three months ended September 30,
2000 was $3.4 million, as compared to $791,000 for the three months
ended September 30, 1999. This increase of approximately $2.6 million
was attributable primarily to an increase in the amount of cash
available for investing resulting from sales of common stock since
September 30, 1999, less amounts used for operations.
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues for the nine months ended September 30, 2000 were
approximately $1.3 million, as compared to approximately $161,000 for
the nine months ended September 30, 1999. Approximately $150,000 of
these revenues 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. Approximately $799,000
of these revenues was earned by SynQuest, United Therapeutics' wholly
owned subsidiary, for the synthesis and manufacture of complex
molecules for third parties. Finally, approximately $311,000 of these
revenues was earned from the resale of pumps and supplies to
distributors in connection with United Therapeutics' lead product,
UT-15.
Research and development expenses consist primarily of
costs to acquire pharmaceutical products and product rights 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 $42.8 million for the nine months ended
September 30, 2000, as compared to $22.8 million for the nine months
ended September 30, 1999. The increase of approximately $20.0 million
was due primarily to the expenditure of approximately $19.8 million
in licensing fees (consisting of $1.0 million in cash and common
stock valued at $18.8 million) in June 2000 to obtain the exclusive
rights to develop sustained release formulations of beraprost in the
United States and Canada, increased expenses of approximately $7.4
million related to patient enrollment in United Therapeutics'
clinical trials and increased expenses of approximately $2.0 million
related to other research. The increase was offset by the prior year
expenditure of $9.1 million in licensing fees (consisting of $100,000
in cash and common stock valued at $9.0 million) in 1999 to obtain
the exclusive rights to develop the immediate release formulation of
beraprost in the United States and Canada.
General and administrative expenses consist primarily of
salaries, office expenses and professional fees. General and
administrative expenses were $7.9 million for the nine months ended
September 30, 2000, as compared to $3.2 million for the nine months
ended September 30, 1999. This increase was due primarily to
nonrecurring grants of approximately $2.4 million of stock and
options, increased expenses of approximately $1.0 million related to
professional fees, as well as increased staffing and related travel
to support expanded operations.
Interest income for the nine months ended September 30,
2000 was $6.7 million, as compared to approximately $1.2 million for
the nine months ended September 30, 1999. This increase was
attributable primarily to an increase in the amount of cash available
for investing resulting from sales of common stock since September
30, 1999, less amounts used for operations.
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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. On July 16, 1999, United Therapeutics' closed on the
sale of 675,000 over-allotment shares to its underwriters and
received net proceeds, after deducting underwriting commissions and
offering expenses, of approximately $7.5 million. On January 18,
2000, United Therapeutics' closed on the sale of 2.5 million shares
of common stock at $32.00 per share in a private placement and
received net proceeds, after deducting underwriting commissions and
offering expenses, of approximately $74.8 million. On July 20, 2000,
United Therapeutics' closed on the sale of 1.3 million shares of its
common stock at $110.00 per share in a private placement and received
net proceeds, after deducting underwriting commissions and offering
expenses, of approximately $134.3 million.
United Therapeutics' working capital at September 30, 2000
was $232.9 million, as compared with $48.1 million at December 31,
1999. Current liabilities at September 30, 2000 were approximately
$7.9 million, as compared with $4.6 million at December 31, 1999.
United Therapeutics' debt at each of September 30, 2000 and December
31, 1999 was approximately $1.8 million and consisted of equipment
leases and two mortgage notes, one secured by a certificate of
deposit, and both secured by the buildings and property owned by
United Therapeutics located at 1106 - 1110 Spring Street in Silver
Spring, Maryland. Both mortgages are due in monthly installments over
30 years.
Net cash used in operating activities was approximately
$21.1 million and $16.0 million for the nine months ended September
30, 2000 and 1999, respectively. The increase resulted from the
expansion of United Therapeutics' operations, particularly with
respect to increased costs for UT-15, beraprost and other product
trials. For the nine months ended September 30, 2000 and 1999, United
Therapeutics invested approximately $363,000 and $1.9 million
respectively, in cash for property, plant and equipment. Net cash
provided by financing activities was approximately $210.7 million and
$59.9 million for the nine months ended September 30, 2000 and 1999,
respectively. Cash flows from financing activities for the nine
months ended September 30, 2000 were derived primarily from the
private placements of common stock in January 2000 and July 2000.
Cash flows from financing activities for the nine months ended
September 30, 1999 were derived primarily from the initial public
offering in June 1999.
United Therapeutics has contracted with various companies
and research organizations to coordinate and perform clinical trials
and to provide other services related to the development of UT-15 and
other products. It is anticipated that approximately $4.1 million in
cash will be used for the remainder of 2000 under these agreements.
These expenses will be funded from existing working capital. United
Therapeutics expects to make milestone payments of up to
approximately $25,000 during the remainder of 2000. United
Therapeutics does not expect to make any royalty payments during
2000.
United Therapeutics expects that existing capital resources
will be adequate to fund its operations through 2004. 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 existing and
additional products;
Future milestone and royalty payments;
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;
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Development of manufacturing 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; and
Establishment of additional strategic or licensing arrangements
with other companies.
As of December 31, 1999, United Therapeutics had available
approximately $27.4 million in net operating loss carryforwards and
$11.5 million in business tax credit carryforwards for federal income
tax purposes that expire at various dates through 2018. As of
September 30, 2000, United Therapeutics had available approximately
$65.7 million in net operating loss carryforwards and $15.1 million
in business tax credit carryforwards. A portion of these carryforward
items is subject to certain limitations. United Therapeutics does not
believe that the limitations will cause the net operating loss and
general business credit carryforwards to expire unused.
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 by SFAS Nos. 137 and
138, for fiscal quarters beginning January 1, 2001. 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 December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 is required to
be implemented by United Therapeutics in the quarter ending December 31, 2000.
United Therapeutics does not expect SAB No. 101 to have a material impact on its
revenue recognition policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
United Therapeutics does not have significant exposure to
market risks associated with changes in interest rates related to its
corporate and government debt securities held as of September 30,
2000.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the three month period ended September 30, 2000,
United Therapeutics sold the following securities in reliance upon
Section 4(2) and/or Regulation D of the Securities Act of 1933, as
amended:
Private Placement of Common Stock
In July 2000, United Therapeutics closed on the sale of
1,300,000 shares of its common stock at $110.00 per share in a
private placement to accredited institutional investors. Net
proceeds, after deducting commissions and offering expenses, were
approximately $134.3 million. The common stock was registered for
resale with the SEC in a filing that was declared effective on August
4, 2000.
Employee Stock Awards
In July and September 2000, United Therapeutics issued
1,700 shares of common stock to two employees pursuant to their
employment agreements. United Therapeutics received no proceeds from
the issuances. The employees were not directors or officers.
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(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. The Securities and Exchange Commission
declared United Therapeutics' registration statement effective on
June 17, 1999. The net proceeds to United Therapeutics from the
offering of the 5,175,000 shares, after deducting expenses was
approximately $56.4 million.
Since the completion of the initial public offering in June 1999 and the
exercise of the over-allotment shares in July 1999, the net offering proceeds
have been applied to the following uses in the following approximate amounts:
$23.9 million for research and development, $489,000 to purchase machinery,
equipment and leasehold improvements, $4.6 million for working capital and
general corporate purposes (including compensation to employees, officers, and
directors in accordance with their standard agreements), $313,000 to purchase
SynQuest, Inc., $3.1 million to purchase a 15 percent interest in Synergy
Pharmaceuticals, Inc., and $483,000 to repay debt. United Therapeutics has
temporarily invested the $23.5 million balance of the offering proceeds in
short-term investments. The short-term investments consist primarily of high
credit quality debt instruments of corporations and financial institutions with
maturities of three months or less when purchased. Except as indicated, all of
the payments described above were direct or indirect payments to entities or
persons other than directors, officers, or greater than 10% owners of any
equity securities of United Therapeutics.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
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).
4.1 Registration Rights Agreement, dated as of October 30, 1998, by and among the Registrant, Merrill Lynch
KECALP L.P. 1997, and Merrill Lynch KECALP International L.P. 1997, incorporated by reference to Exhibit
4.2 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
4.2 Form of Common Stock Purchase Agreement, executed as of March 1998, by and between the Registrant and each
of Community Investment Partners III L.P., LLLP, Mary Ellen and Raul Evelio Perez, Trustees of the Mary
Ellen Perez revocable trust dated October 28, 1993, Edward D. Jones & Co., Oakwood Investors I, L.L.C. and
James L. Nouss, Jr., incorporated by reference to Exhibit 4.3 of the Registrant's Registration Statement on
Form S-1 (Registration No. 333-76409).
4.3 Stock Option Grant to purchase shares of United Therapeutics' common stock, issued on September 16, 1998,
to Toray Industries, Inc., incorporated by reference to Exhibit 4.5 of the Registrant's Registration
Statement on Form S-1 (Registration No. 333-76409).
4.4 Registration Rights Agreement, dated as of October 7, 1999, by and among the Registrant and Robert M.
Moriarty, Ph.D., Raju Penmasta, Ph.D., Liang Guo, Ph.D., George W. Davis, Esq. and David Moriarty,
incorporated by reference to Exhibit 10.2 of the Registrant's Form 10-Q for the period ended September 30,
1999.
4.5 Form of Purchase Agreement dated as of December 22, 1999, incorporated by reference to Exhibit 4.6 of the
Registrant's Registration Statement on Form S-1, as amended on Form S-3 (Registration No. 333-93853).
4.6 Registration Rights Agreement, dated as of June 27, 2000 by and between the Registrant and Toray
Industries, Inc., incorporated by reference to Exhibit 4.7 of the Registrant's Registration Statement on
Form S-3 (Registration No. 333-40598).
4.7 Stock Option Grant to purchase shares of United Therapeutics' common stock, issued on June 27, 2000, to
Toray Industries, Inc., incorporated by reference to Exhibit 4.8 of the Registrant's Registration Statement
on Form S-3 (Registration No. 333-40598).
4.8 Form of Stock Purchase Agreement dated July 13, 2000 incorporated by reference to Exhibit 99.2 of the
Registrant's Current Report on Form 8-K filed July 14, 2000.
10.1 Exclusive License Agreement dated as of June 23, 2000 between the Registrant and Toray Industries, Inc,
incorporated by reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-3
(Registration No. 333-40598).
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On July 13, 2000, the Registrant filed a Form 8-K dated
July 13, 2000 reporting an Item 5 event.
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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: November 10, 2000 /s/ Martine A. Rothblatt
------------------------ ------------------------
By: Martine A. Rothblatt
Title: Chief Executive Officer
/s/ Fred T. Hadeed
------------------------
By: Fred T. Hadeed
Title: Chief Financial Officer
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EXHIBIT INDEX
The following exhibits are filed as a part of this report:
27 Financial Data Schedule
