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United Therapeutics Reports 2008 Fourth Quarter and Annual Financial Results
Date:2/17/2009

- Total Annual Revenues of $281.5 Million

- Annual Basic and Diluted Net Loss per Share of $1.87

- Annual Earnings Before Non-Cash Charges of $5.20 per Basic Share, or $4.77 per Diluted Share

SILVER SPRING, Md., Feb. 17 /PRNewswire-FirstCall/ -- United Therapeutics Corporation (Nasdaq: UTHR) today announced its financial results for the fourth quarter and year ended December 31, 2008.

"We are pleased that our revenues for 2008 grew in excess of 30% for the seventh consecutive year to $281.5 million," remarked Martine Rothblatt, Ph.D., United Therapeutics' Chairman and Chief Executive Officer. "Along with the continued positive trend relative to existing revenues, we are also excited about the potential to reach even more pulmonary hypertension patients in 2009 with inhaled treprostinil and oral tadalafil."

Total revenues for the three months ended December 31, 2008, were $75.9 million, up from $59.9 million for the three months ended December 31, 2007. Net loss for the three months ended December 31, 2008, was $81.1 million or $3.42 per basic share, compared to net income of $2.0 million or $0.09 per basic share for the three months ended December 31, 2007. Research and development expense for the three months ended December 31, 2008, included a $150.0 million charge related to a one-time, upfront payment to Eli Lilly & Company (Lilly) pursuant to agreements for the license, manufacture and supply of tadalafil for pulmonary hypertension. Earnings before non-cash charges, a non-GAAP financial measure, defined as net (loss) income before non-cash income taxes, non-cash license fee expenses, depreciation, amortization, impairment charges and share-based compensation (stock option and share tracking award expense), for the three months ended December 31, 2008, was $25.1 million or $1.06 per basic share, compared to $24.1 million or $1.11 per basic share for the three months ended December 31, 2007.

Results

Revenues. Revenues for the year ended December 31, 2008, increased by 33% over the year ended December 31, 2007, from $210.9 million to $281.5 million. The increase in revenues in 2008 was primarily due to an increase in the number of patients prescribed Remodulin. Gross margins from sales were $249.2 million and $186.5 million, or 89%, for the years ended December 31, 2008 and 2007, respectively.

The table below summarizes the components of revenues (in thousands):

                                   Three Months Ended       Year Ended
                                      December 31,          December 31,
                                    2008        2007      2008      2007

    Revenues:
       Remodulin                 $73,137     $56,824  $269,718  $200,879
       Telemedicine products
        and services               2,370       2,205     9,485     7,725
       Distributor fees              342         827     2,234     2,160
       Other products                 13          42        60       179
       Total revenues            $75,862     $59,898  $281,497  $210,943


Operating Expenses. Our operating expenses principally consist of research and development, selling, general and administrative and costs of service and product sales.

The table below summarizes research and development expense by major project and non-project components (in thousands):

                                       Three Months Ended     Year Ended
                                          December 31,       December 31,
                                         2008     2007      2008     2007

    Project and non-project:
      Cardiovascular                  $20,890   $8,570   $60,549  $38,459
        License fees                  150,000        -   150,000   11,013
      Cancer                              687    3,189     2,771   13,874
      Infectious disease                  725      278     1,556      824
      Share-based compensation          4,918    3,671    16,200   12,373
      Other                             2,531    2,002     8,105    6,809
      Total research and development
       expense                       $179,751  $17,710  $239,181  $83,352



Cardiovascular programs. During the three months ended December 31, 2008, expenses related to our cardiovascular programs increased over those for the three months ended December 31, 2007, as a result of the following:

  • Expenses associated with our inhaled and oral treprostinil programs increased by approximately $3.1 million. The increase in related expenditures corresponded to the progression of ongoing clinical trials, activities surrounding the unblinding of our FREEDOM-C trial of oral treprostinil and the filing of our application for marketing approval of inhaled treprostinil in the European Union;
  • We made milestone payments of $4.0 million and $2.0 million to Toray Industries, Inc. (Toray) and Aradigm Corporation (Aradigm), respectively, during the fourth quarter of 2008. These milestone payments were made in accordance with the terms of our agreements with Toray and Aradigm to develop and commercialize Toray's beraprost-MR for pulmonary arterial hypertension and Aradigm's AERx Essence for use with inhaled treprostinil;
  • Growth in our clinical staff to focus on new and investigational cardiovascular projects during 2008 resulted in a corresponding increase in salaries and related expenses of approximately $2.7 million for the fourth quarter of 2008; and
  • In December 2008, we made a one-time, upfront payment of $150.0 million to Lilly in exchange for the exclusive right to develop, market, promote and commercialize the orally administered drug tadalafil for the treatment of pulmonary hypertension in the United States and Puerto Rico. This upfront payment was made pursuant to a license agreement and a related manufacturing and supply agreement with Lilly. The U.S. Food and Drug Administration has not yet approved tadalafil for marketing, but the New Drug Application for tadalafil is currently under review. Accordingly, research and development expenses for the fourth quarter of 2008 included a corresponding charge of $150.0 million. As part of the transaction, we issued approximately 3.2 million shares of our common stock to Lilly on December 18, 2008, in exchange for $150.0 million. As a result, the Lilly transaction had no net impact on our cash.

The table below summarizes selling, general and administrative expense by major categories (in thousands):

                                   Three Months Ended      Year Ended
                                       December 31,        December 31,
                                     2008       2007     2008      2007
    Category
      General and administrative  $13,171    $13,429  $41,284   $38,515
      Sales and marketing           8,778      7,826   32,899    24,159
      Share-based compensation        (84)    22,971   20,123    36,353
      Total selling, general and
       administrative expense     $21,865    $44,226  $94,306   $99,027



During the three months and year ended December 31, 2008, selling, general and administrative expense decreased as compared to the three months and year ended December 31, 2007, primarily as the result of a reduction in share-based compensation expense. For the three months and year ended December 31, 2007, we recognized share-based compensation expense of approximately $20.3 million and $23.7 million, respectively, representing the fair value of the year-end stock option grant to our Chief Executive Officer, which is determined by a formula set forth in her employment agreement. Based on this formula, our Chief Executive Officer did not receive a stock option grant for the year ended December 31, 2008. Accordingly, during the three months ended December 31, 2008, we reversed approximately $6.4 million in estimated compensation expense that had been accrued through September 30, 2008.

Income Tax Benefit. As a result of net losses incurred before income taxes, we recognized income tax benefits of $51.6 million and $29.5 million, respectively, for the three months and year ended December 31, 2008. For the three months and year ended December 31, 2007, we recognized income tax benefits of approximately $7.1 million and $3.3 million, respectively. Related tax benefits recognized in 2007 resulted principally from the generation of business tax credits during the year for our orphan drug related research and development activities.

Earnings Before Non-Cash Charges

A reconciliation of net (loss) income to earnings before non-cash charges is presented below (in thousands, except per share data):

                                                                    Three
                                                                Months Ended
                              Year Ended December 31,           December 31,
                       2008       2007       2006      2005     2008     2007
    Net (loss)
     income, as
     reported      $(42,789)   $19,859    $73,965   $65,016 $(81,145)  $1,986
    Add (subtract)
     non-cash
     charges:
      Income tax
       benefit,
       net of
       taxes paid   (31,137)    (4,831)   (34,361)  (17,679) (51,557)  (7,466)
      License fee   150,000(1)  11,013(2)       -         -  150,000(1)     -
      Depreciation
       and
       amortization   4,955      3,427      2,713     2,534    1,810      941
      Impairments     1,605      3,582      2,024         -    1,100    2,067
      Share-based
       compensation  36,393     48,766     23,513       983    4,852   26,585
    Earnings
     before non-cash
     charges       $119,027    $81,816    $67,854   $50,854  $25,060  $24,113

    Earnings before
     non-cash charges
     per share:
      Basic(3)        $5.20      $3.85      $2.95     $2.23    $1.06    $1.11
      Diluted(4)      $4.77      $3.64      $2.81     $2.02    $1.02    $1.02

    (1) During the three months ended December 31, 2008, we made a one-time
        payment of $150.0 million to Lilly related to our license and
        manufacturing and supply agreements. We also issued approximately 3.2
        million shares of our common stock to Lilly for $150.0 million under a
        related stock purchase agreement. Since there was no net impact on
        our cash flows associated with these transactions, we have presented
        related up-front fees as an adjustment to net loss.

    (2) During the year ended December 31, 2007, we issued 200,000 shares of
        our common stock to Toray. Based on the closing price of our common
        stock, the fair value of the shares issued was expensed as research
        and development.

    (3) Calculated by dividing earnings before non-cash charges presented
        above by the weighted average shares outstanding for the period.

    (4) Calculated by dividing earnings before non-cash charges presented
        above by the weighted average shares outstanding for the period
        adjusted for potentially dilutive securities. For the three months
        and year ended December 31, 2008, approximately 24.6 million shares
        and 25.0 million shares, respectively, were used in calculating
        diluted earnings before non-cash charges.


Conference Call

United Therapeutics will host a half-hour teleconference on Tuesday, February 17, 2009, at 9:00 a.m. Eastern Time. The teleconference is accessible by dialing 877-879-6209, with international callers dialing 719-325-4753. A rebroadcast of the teleconference will be available for one week by dialing 888-203-1112, with international callers dialing 719-457-0820 and using access code 6654716.

This teleconference is also being webcast and can be accessed via United Therapeutics' website at http://ir.unither.com/events.cfm.

About United Therapeutics

United Therapeutics Corporation is a biotechnology company focused on the development and commercialization of unique products to address the unmet medical needs of patients with chronic and life-threatening cardiovascular and infectious diseases and cancer.

Non-GAAP Financial Information

This press release contains certain financial measures that do not comply with U.S. generally accepted accounting principals (GAAP). This measure supplements our financial results prepared in accordance with GAAP.

We use earnings before non-cash charges, a non-GAAP financial measure, internally for operating, budgeting and financial planning purposes and as a metric to determine the efficiency of our operations. We believe our investors' understanding of our performance is enhanced by disclosing this measure.

The presentation of this non-GAAP financial measure is not to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Forward-looking Statements

Statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, our expectations and intentions related to financial performance and results, including annual revenue growth and our expectations about inhaled treprostinil and tadalafil reaching more patients. These forward-looking statements are subject to certain risks and uncertainties, such as those described in our periodic reports filed with the Securities and Exchange Commission, that could cause actual results to differ materially from anticipated results. Consequently, such forward-looking statements are qualified by the cautionary statements, cautionary language and risk factors set forth in our periodic reports and documents filed with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and current reports on Form 8-K. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We are providing this information as of February 17, 2009, and assume no obligation to update or revise the information contained in this press release whether as a result of new information, future events or any other reason.

Remodulin is a registered trademark of United Therapeutics Corporation.

AERx Essence is a registered trademark of Aradigm Corporation.[uthr-g]


                       UNITED THERAPEUTICS CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)

                                Three Months Ended      For the Years Ended
                                    December 31,            December 31,
                                  2008         2007       2008         2007
    Revenues:
        Net product sales      $73,206      $56,899   $270,005     $201,348
        Service sales            2,314        2,172      9,258        7,435
        Distributor fees           342          827      2,234        2,160
         Total revenues         75,862       59,898    281,497      210,943
    Operating expenses:
        Research and
         development           179,751       17,710    239,181       83,352
        Selling, general and
         administrative         21,865       44,226     94,306       99,027
        Cost of product sales    7,267        5,745     26,957       19,919
        Cost of service sales      839          612      3,109        2,342
         Total operating
          expenses             209,722       68,293    363,553      204,640
         (Loss) income from
          operations          (133,860)      (8,395)   (82,056)       6,303
    Other income
     (expense):
        Interest income          2,302        3,939     11,025       13,602
        Interest expense           (16)         (34)       (16)      (2,175)
        Equity loss in
         affiliate                 (71)         (56)      (226)        (321)
        Other, net              (1,057)        (572)    (1,025)        (826)
         Total other income,
          net                    1,158        3,277      9,758       10,280
    (Loss) income before
     income tax benefit       (132,702)      (5,118)   (72,298)      16,583
    Income tax benefit          51,557        7,104     29,509        3,276
    Net (loss) income         $(81,145)      $1,986   $(42,789)     $19,859
    Net (loss) income per
     common share:
        Basic                   $(3.42)       $0.09     $(1.87)       $0.94
        Diluted                 $(3.42)       $0.08     $(1.87)       $0.88
    Weighted average
     number of common
     shares outstanding:
        Basic                   23,727       21,666     22,901       21,224
        Diluted                 23,727       23,746     22,901       22,451



                SELECTED CONSOLIDATED BALANCE SHEET DATA
                     (In dollars and thousands)

                                                            December 31,
                                                         2008          2007
    Cash, cash equivalents and marketable investments
     (excluding restricted amounts of $45,755 and
     $44,195, respectively)                           $336,318      $299,792
    Total assets                                       871,319      587, 018
    Total liabilities                                  352,738       280,346
    Total stockholders' equity                         507,699       295,790



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SOURCE United Therapeutics Corporation
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