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  1. 1. Student Managed Investment Fund Healthcare Sector | Fall 2016
  2. 2. Table of Contents Sector Outlook Company Information Company Drivers Financial Analysis Valuation Analysis Summary Appendix 12/9/2016 Biotechnology 2
  3. 3. Sector Outlook
  4. 4. Sector Performance 12/9/2016 Biotechnology 4 2-3 Years: 1000-5000 patients, 30% success rate 1-3 Years: Testing on 100-300 patients, 35% success rate 1 Year: Testing on 20-80 individuals, 66% success rate 107% 234% 101% 84% 76% 59% 55% 29% 20% 15% -14% -50% 0% 50% 100% 150% 200% 250% HealthCare Biotechnology Consumer Discretionary Financials Information Technology Industrials Consumer Staples Materials Utilities Telecommunication Energy Inelastic consumption Defensive Nature Emerging markets & population growth New Markets Advances in technology & medical equipment Innovation Industry Growth Drivers Government Expenditure Legislation & Regulation Affordable Healthcare Act Regulatory Performance 2011 - 2015 60% 10% 9% 12% 5% 4% Biotechnology Healthcare Providers & Services Pharmaceuticals Healthcare Equipment & Services Life Sciences, Tools & Services Healthcare Technology Breakdown by Subsector 2015 Breakdown by Region 2015 FDA 61.65% 18.98% 17.74% 3.40% 1.31% North America Europe Asia Pacific Latin America Middle East
  5. 5. Sub Sector Performance 12/9/2016 Biotechnology 5 350 450 550 650 750 850 900 1400 1900 2400 2900 3400 3900 4400 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 S&P 500 Biotechnology S&P 500 Healthcare S&P 500 Index Performance Regulatory Agencies United States Department of Agriculture U.S Environmental Protection Agency Food and Drug Administration $276 $310 $359 $449 $488 $544 $609 0 100 200 300 400 500 600 700 2012 2013 2014 2015 2016 2017E 2018E Revenue(Millions) Biotech Sales Growth Number of adults aged 65 and older Rising chronic diseases Research and Development expenditure Reduced drug price control Biotech Drivers
  6. 6. Company Information
  7. 7. Company Overview Previous Close $134.55 52-Week High $164.04 52-Week Low $97.52 Market Cap 5,513.2M Outstanding Shares 42.4M EPS $15.86 P/E 8.72x Forward 1 year P/E 8.23x 743.2 916.1 1,117.0 1,288.5 1,465.8 1,594.7 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 December 2011 December 2012 December 2013 December 2014 December 2015 September 2016 Ticker: UTHR Biotechnology Company Solutions for chronic and life-threatening diseases 12/9/2016 Biotechnology 7 Revenue Analysis (in millions) $117 $119 $121 $123 $125 $127 $129 $131+7.3% Stock Price on Election Day 11/09/2016 Opening
  8. 8. Business Overview 39.2% 32.2% 19.1% 8.1% 1.4% Remodulin Tyvaso Adcirca Orenitram Unituxin 92% 8% United States Rest-of-World (Mostly Europe) $573 $470 $279 $118 $20 0 100 200 300 400 500 600 700 Remodulin Tyvaso Adcirca Orenitram Unituxin Total Revenue 1,460.5 M 12/9/2016 Biotechnology 8 Total Revenue in 2015 Revenue Repartition in 2015 Geographic Repartition in 2015
  9. 9. Company Drivers
  10. 10. Consumer Trends 12/9/2016 Biotechnology 10 607 901 1,400 2,100 0 500 1000 1500 2000 2500 2000 2015 2030 2050 HIV 4% Cumulative Trauma Disorder 50% Portal Hypertension 11% Coronary Heart Disease 19% Drugs/Toxins 10% Other 6% $614.2 $716.8 $852.9 $960.8 $955.4 $1138.4 $1291.8 $1434.6 $1584.9 $. $200. $400. $600. $800. $1000. $1200. $1400. $1600. $1800. 2005 2007 2009 2011 2013 2015 2017 2019 2021 Defense & Veterans Health Insurance Assistance Medicaid Medicare (Net of Premiums) Other Total Increase in PAH Incidence PAH Market expected to reach $8.7 Billion by 2025 Aging Population Government Support Government Spending World Population Aged 60+ (in millions) Diseases Related to Pulmonary Arterial Hypertension
  11. 11. License Agreements 12/9/2016 Biotechnology 11 $491 $554 $573 $605 $610 $177 $222 $279 $355 $356 $- $100 $200 $300 $400 $500 $600 $700 2013 2014 2015 2016 2017 Remodulin Sales Adcirca Sales $491 $554 $573 $605 $610 59.3 47.3 12.4 $- $100 $200 $300 $400 $500 $600 $700 2013 2014 2015 2016 2017 Remodulin Sales Cost of Goods Sold Adcirca represented 16%, 17%, and 19% of total revenue for 2013, 2014, and 2015 Develop and market beraprost for cardiovascular indications Develop the Remodulin Implantable System Goal is to develop pre-filled, semi- disposable pump for subcutaneous delivery of Remodulin Sales Growth Projections (in thousands) Remodulin Sales and COGS (in thousands)
  12. 12. Patents 12/9/2016 Biotechnology 12 Remodulin Tyvaso Adcirca Orenitram Unituxin $572.8M $470.1M $278.8M $118.4M $20.4M Patents with expiration dates from 2017 to 2028 Patent expires in 2017 Patents with expiration dates from 2024 to 2031 Patents with expiration dates from 2017 to 2031 Patents expire in 2028 and 2029
  13. 13. Pipeline 12/9/2016 Biotechnology 13 Preclinical Unexisome Transplant Organs RemoPro Commercial Remodulin Tyvaso Adcirca Orenitram Unituxin Phase 1 No drugs at the moment Phase 3 RemoSynch (NDA) RemUnity (NDA) OreniPlus Tysuberprost Tyvaso-ILD RemoLiv OreniLeft Phase 2 Dinutuximab Ex-Vivo Lung Perfusion Aurora-GT OreniCell
  14. 14. 12/9/2016 14Biotechnology SWOT Analysis S T W O Strengths  Large player in PAH Market  Diversity of pipeline  Large portion of revenue is patented until 2028-2029 Threats  Increased tariffs  Generic competition  Delayed drug releases Weaknesses  Production Cost  License Agreements can be terminated Opportunities  PAH market growth  Increase infrastructure, medical research
  15. 15. Financial Analysis
  16. 16. Liquidity & Solvency 37.5% 33.4% 39.7% 34.1% 27.3%28.0% 25.5% 22.4% 10.2% 0.3% 21.9% 20.3% 18.3% 9.2% 0.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2011 2012 2013 2014 2015 Total Liabilities/Total Assets Total Debt/Equity Total Debt/Capital 2.6x 3.8x 1.3x 1.9x 2.9x 4.4x 2.3x 3.4x 1.2x 1.7x 2.6x 4.0x 0x 1x 1x 2x 2x 3x 3x 4x 4x 5x 5x 2011 2012 2013 2014 2015 2016 Current Ratio Quick Ratio 15x 26x 16x 31x 148x 16x 27x 18x 32x 155x 0x 20x 40x 60x 80x 100x 120x 140x 160x 180x 2011 2012 2013 2014 2015 EBIT / Interest Expenses EBITDA / Interest Expenses +382% 0.8x 0.6x 0.9x 0.2x 0.0x -0.1x 0.0x 0.1x 0.2x 0.3x 0.4x 0.5x 0.6x 0.7x 0.8x 0.9x 1.0x 2011 2012 2013 2014 2015 Total Debt/EBITDA 12/9/2016 Biotechnology 16 Solvency Ratios Solvency Ratios Liquidity Ratios Liquidity Ratios
  17. 17. Capital Structure 22% 20% 18% 9% 0.3% 0% 78% 80% 82% 91% 99.7% 100% $- $500 $1,000 $1,500 $2,000 2011 2012 2013 2014 2015 2016 Total Debt Total Common Equity $5.60 $1,000.00 $- $200 $400 $600 $800 $1,000 $1,200 Bonds and Notes Revolving Credit $1,214 $1,360 $1,542 $1,369 $1,594 $1,839 $168.71 $145.73 $701.48 $442.72 $1,048.30 $388.02 $(200) $- $200 $400 $600 $800 $1,000 $1,200 2011 2012 2013 2014 2015 2016 Free Cash Flow Capital Expenditure $324 $324 $317 $139 $6 $266 $276 $282 $126 $5 $- $50 $100 $150 $200 $250 $300 $350 2011 2012 2013 2014 2015 Total Principal Due Total Debt Outstanding - 5554% $2,458 $2,716 $4,671 $6,672 $4,713 $2,596 $2,921 $5,073 $7,241 $5,661 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2011 2012 2013 2014 2015 Enterprise Value Market Capitalization 12/9/2016 Biotechnology 17 Capital EV – Market Cap DebtFCF - CAPEXTotal Debt
  18. 18. Growth Outlook $343 $456 $324 $571 $732 $1,074 $323 $428 $292 $539 $699 $1,043 $218 $304 $175 $340 $652 $708 $0 $200 $400 $600 $800 $1,000 $1,200 2011 2012 2013 2014 2015 2016 EBITDA EBIT Net Income $743.18 $916.08 $1,116.98 $1,288.52 $1,465.76 $1,594.66 $1,684.68 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2011 2012 2013 2014 2015 2016 2017 $156 $195 $394 $381 $453 $326 $175 $173 $299 $243 $245 $157 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 2011 2012 2013 2014 2015 2016 Selling General & Admin Expenses R & D Expenses R&D +73% $3.67 $5.71 $3.28 $6.28 $12.72 $14.78 $- $2 $4 $6 $8 $10 $12 $14 $16 2011 2012 2013 2014 2015 2016 12/9/2016 Biotechnology 18 Total Revenue Income Comparison Diluted EPS SG&A - R&D
  19. 19. Valuation Analysis
  20. 20. Fundamental Analysis Profitability 2011 2012 2013 2014 2015 2016 Gross Margin % 88.0% 87.0% 88.3% 90.2% 95.3% 95.6% EBITDA Margin % 46.2% 49.7% 29.0% 44.3% 49.9% 67.4% Operating Margin % (EBIT) 43.4% 46.8% 26.2% 41.8% 47.7% 65.4% Pretax Margin % 40.3% 48.1% 25.0% 40.8% 71.3% NA Net Income Margin % 29.3% 33.2% 15.6% 26.4% 44.5% 44.4% Management Effectiveness 2011 2012 2013 2014 2015 2016 Return on Assets % 13.7% 17.0% 9.8% 17.0% 21.5% 29.4% Return on Capital % 16.8% 20.8% 12.6% 23.1% 29.5% 39.1% Return on Equity % 23.7% 30.0% 14.9% 27.2% 46.0% 42.8% Debt 2011 2012 2013 2014 2015 2016 Total Debt/Equity 28.0% 25.5% 22.4% 10.2% 0.3% N/A 12/9/2016 Biotechnology 20  2016 increase in margins  2016 higher compared to previous years  2016 No Debt
  21. 21. Comparable Analysis – Part 1 United Therapeutics Narrow Competitors Industry Management Effectiveness ROA 29.40% 8.3% 7.3% ROE 39.07% 25.6% 20.4% ROC 42.84% 14.8% 11.5% Financial Strength Current Ratio 4.4x 3.2x 2.3x Quick Ratio 4.0x 2.7x 1.7x Debt/Equity 0.3% 87.5% 134.9% Profitability Ratios Gross Margin 95.6% 81.6% 59.6% EBITDA Margin 65.4% 25.1% 22.5% Operating Margin 65.4% 21.5% 16.8% Pretax Margin 71.3% 19.9% 14.0% Profit Margin 39.6% 15.5% 11.5% 12/9/2016 Biotechnology 21  Positive and high return  Low debt compared to its peers  High performance compared to its peers
  22. 22. Comparable Analysis – Part 2 United Therapeutics Actelion Alexion Pharmaceuticals Regeneron Pharmaceuticals P/E 9.00x 24.89x 52.66x 59.84x Price/EBITDA 5.54x 19.47x 29.12x 32.16x Price/Sales 3.73x 7.33x 9.35x 8.93x Price/Book 3.08x 12.71x 3.24x 9.84x Price to FCF 13.04x 21.33x 51.40x 50.53x EV/EBITDA 4.1x 18.4x 29.5x 30.4x 0x 10x 20x 30x 40x 50x 60x 70x P/E Price/EBITDA Price/Sales Price/Book Price to FCF EV/EBITDA United Therapeutics Actelion Alexion Pharmaceuticals Regeneron Pharmaceutcial 12/9/2016 Biotechnology 22 Actelion Market Cap: 20,265.2 M Ticker: ATLN Biopharmaceutical company, discovers, develops, and commercializes drugs for unmet medical needs, such as PAH. Alexion Pharmaceuticals Market Cap: 27,360.5 M Ticker: ALXN Biopharmaceutical company, develops and commercializes life-transforming therapeutic products Regeneron Pharmaceuticals Market Cap: 40,302.9 M Ticker: REGN Discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions worldwide Price Multiples
  23. 23. Valuation Analysis 12/9/2016 Biotechnology 23 $155.72 $167.75 $97.52 $119.72 $132.38 $134.62 $174.60 $193.74 $164.04 $149.38 $136.72 $163.70 $90.00 $110.00 $130.00 $150.00 $170.00 $190.00 DCF Value at 3.7x Exit EBITDA Range DCF Value at 1.5% Perpetuity Range 52 Week Market High/Low P/E P/B Average Target Price $149.16 Assumptions EV/EBITDA 4.4x - 3.9x EV/EBIT 5.8x - 5.2x P/E 7.3x - 6.6x P/FCF 0.2x - 0.1x DCF Assumptions Growth Rate 1.50% Implied TV exit EBITDA multiple 4.52x Exit Multiple 3.7x Weighted Average Cost of Capital Cost of debt 0.0% Tax rate 35.8% Risk free rate 2.2% Beta 1.33 Market Return 9.0% Cost of equity 11.3% Cost of capital (WACC) 11.26% Recommendation BUY Target Price $ 149.16 Current Price $ 134.55 Upside 11% Football Field Analysis
  24. 24. Summary
  25. 25. Key Points 12/9/2016 Biotechnology 25 $155.72 $167.75 $97.52 $119.72 $132.38 $134.62 $174.60 $193.74 $164.04 $149.38 $136.72 $163.70 $90 $110 $130 $150 $170 $190 DCF Value at 3.7x Exit EBITDA Range DCF Value at 1.5% Perpetuity Range 52 Week Market High/Low P/E P/B Average Target Price $149.16 Football Field Analysis 0x 10x 20x 30x 40x 50x 60x 70x P/E Price/EBITDA Price/Sales Price/Book Price to FCF EV/EBITDA United Therapeutics Actelion Alexion Pharmaceuticals Regeneron Pharmaceutcial Price Multiples $743.18 $916.08 $1,116.98 $1,288.52 $1,465.76 $1,594.66 $1,684.68 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2011 2012 2013 2014 2015 2016 2017 Total Revenue 37.5% 33.4% 39.7% 34.1% 27.3%28.0% 25.5% 22.4% 10.2% 0.3% 21.9% 20.3% 18.3% 9.2% 0.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2011 2012 2013 2014 2015 Total Liabilities/Total Assets Total Debt/Equity Total Debt/Capital Solvency Ratios
  26. 26. Appendix
  27. 27. 12/9/2016 28Biotechnology 2011 2012 2013 2014 2015 2016 Revenue 741.1 906.1 1,106.9 1,279.5 1,460.6 1,594.0 Other Revenue 2.1 10.0 10.0 9.0 5.2 0.7 Total Revenue 743.2 916.1 1,117.0 1,288.5 1,465.8 1,594.7 Cost Of Goods Sold 88.9 119.3 131.1 125.9 69.0 69.6 Gross Profit 654.3 796.8 985.9 1,162.6 1,396.7 1,525.0 Selling General & Admin Exp. 156.5 194.9 394.0 381.3 452.6 325.9 R & D Exp. 175.0 173.4 299.3 242.5 245.1 156.6 Depreciation & Amort. - - - - - - Other Operating Expense/(Income) - - - - - - Other Operating Exp., Total 331.5 368.3 693.4 623.8 697.7 482.5 Operating Income 322.8 428.5 292.5 538.8 699.0 1,042.5 Interest Expense (21.4) (16.6) (18.1) (17.6) (4.7) (2.2) Interest and Invest. Income 3.5 - - - - - Net Interest Exp. (17.9) (16.6) (18.1) (17.6) (4.7) (2.2) Other Non-Operating Inc. (Exp.) (0.7) 4.7 4.5 4.0 0.2 4.5 EBT Excl. Unusual Items 304.1 416.5 278.9 525.2 694.4 1,044.7 Impairment of Goodwill - - - - - - Gain (Loss) On Sale Of Assets - - - - 350.0 0 Asset Writedown - (6.8) - - - - Insurance Settlements - 31.0 - - - - Other Unusual Items (5.0) - - - - - EBT Incl. Unusual Items 299.1 440.7 278.9 525.2 1,044.4 1,044.7 Income Tax Expense 81.9 136.2 104.3 185.1 392.8 336.7 Earnings from Cont. Ops. 217.2 304.4 174.6 340.1 651.6 708.0 Earnings of Discontinued Ops. 0.6 - - - - - Extraord. Item & Account. Change - - - - - - Net Income to Company 217.9 304.4 174.6 340.1 651.6 708.0 Minority Int. in Earnings - - - - - - Net Income 217.9 304.4 174.6 340.1 651.6 708.0 Income Statement
  28. 28. 12/9/2016 29Biotechnology Balance Sheet 2011 2012 2013 2014 2015 2016 ASSETS Cash And Equivalents 162.7 154.0 284.3 397.7 831.8 953.0 Short Term Investments 240.8 325.2 409.6 297.8 122.0 79.6 Total Cash & ST Investments 403.5 479.2 693.9 695.5 953.8 1,032.6 Accounts Receivable 88.7 116.6 126.3 162.3 192.8 224.6 Total Receivables 88.7 116.6 126.3 162.3 192.8 224.6 Inventory 46.0 37.3 47.8 66.9 81.3 92.4 Prepaid Exp. 9.9 - - - - - Deferred Tax Assets, Curr. 8.2 - - - - - Other Current Assets 6.2 35.4 46.4 32.8 47.4 36.4 Total Current Assets 562.5 668.5 914.4 957.6 1,275.3 1,386.0 Gross Property, Plant & Equipment 419.3 531.7 571.2 613.4 650.7 - Accumulated Depreciation (53.3) (78.0) (106.2) (135.0) (154.9) - Net Property, Plant & Equipment 366.0 453.7 465.0 478.4 495.8 488.4 Long-term Investments 343.9 305.7 448.1 122.7 175.2 2.3 Goodwill 8.1 10.5 10.7 10.3 10.3 10.3 Other Intangibles 14.0 5.9 3.4 19.2 18.1 23.7 Deferred Tax Assets, LT 190.7 150.1 192.7 198.3 192.7 188.8 Other Long-Term Assets 32.8 32.2 53.3 97.9 17.1 169.7 Total Assets 1,518.1 1,626.6 2,087.6 1,884.4 2,184.4 2,269.2 LIABILITIES Accounts Payable 47.3 10.2 6.7 7.0 7.5 119.0 Accrued Exp. 137.1 148.4 373.5 360.5 385.2 134.7 Curr. Port. of LT Debt - 1.3 282.5 126.4 5.4 - Other Current Liabilities 28.2 16.9 25.0 10.4 42.8 60.9 Total Current Liabilities 212.6 176.8 687.7 504.3 440.8 314.6 Long-Term Debt 265.6 275.0 - - - - Pension & Other Post-Retire. Benefits 33.0 47.2 - - - - Other Non-Current Liabilities 58.4 43.6 140.6 137.7 155.1 115.9 Total Liabilities 569.6 542.6 828.3 642.1 595.9 430.5 Common Stock 0.6 0.6 0.6 0.7 0.7 0.7 Additional Paid In Capital 992.7 1,015.8 1,057.2 1,376.1 1,790.6 1,836.7 Retained Earnings 249.0 553.5 728.0 1,068.1 1,719.8 2,323.2 Treasury Stock (283.0) (471.0) (513.4) (1,185.8) (1,902.1) (2,305.1) Comprehensive Inc. and Other (10.9) (15.0) (13.2) (16.7) (20.4) (16.8) Total Common Equity 948.5 1,084.0 1,259.3 1,242.4 1,588.6 1,838.7 Total Equity 948.5 1,084.0 1,259.3 1,242.4 1,588.6 1,838.7 Total Liabilities And Equity 1,518.1 1,626.6 2,087.6 1,884.4 2,184.4 2,269.2

Hinweis der Redaktion

  • Sector Performance
    Healthcare Sector Performance for the past 5 years compared to every other sector has performed above average, placing itself in third place just after Consumer Discretionary and Financials.
    The GICS Level 1 SP 500 Healthcare Index has also performed better than the standard SP500 Index for the past five years.
    Industry Growth Drivers
    The Healthcare Sector as an industry is defensive in nature, meaning that there is inelastic consumption regardless of how the market is performing in general.
    Every year there are new markets available and there is also a constantly increasing human population in need of healthcare services.
    The advancement in technology, along with new machines have made it possible for rapid advances in innovation within the healthcare sector.
    Regulatory
    Healthcare is reliable on government decisions & investments. One example is the Affordable Healthcare Act also known as ObamaCare.
    FDA Approval Process
    The general FDA process incl
  • Revenue from NASDAQ Biotech has been increasing over the past years since more of the population are reaching the age of 65 and older and are becoming dependent on treatments for sicknesses and diseases they have acquired. Biotech has beaten both the SP500 Healthcare and SP500 index normalized last price for the past 6 years.
    Biotechnology Drivers
    More people are reaching the age of 65 and older and develop chronic diseases which leads to an increase of demand for treatment and drugs.
    With the evolution of technology, research and development for biotech has more opportunities for expansion and with less government regulation, there are higher chances of biotech products to be available in the market which results in more sales and the industry will have more drug price control than the government.

    Regulatory Agencies
    The three top regulatory agencies that oversee biotechnology activity are the FDA, the U.S. Protection Agency and the U.S. Department of Agriculture.


  • United Therapeutics is a biotechnology company focused on the development and commercialization of innovative products for the treatments of chronic and life-threatening diseases.

    UTHR goal is to conduct the most insightful clinical trials, in order to develop the best medicines possible from their intellectual property.

    With a market capitalization of 5.5 billion, United Therapeutics is a growing company, which has increased its revenues by +127% over the past five years.

    On the board, you can notice some key figures: yesterday’s close, 52-week high and low, outstanding shares, EPS, P/E, and projected P/E.
  • Today, the company has a total of five approved products on the market. All of them are focused on a specific market segment, which is the Pulmonary Arterial Hypertension (PAH).

    Among their product portfolio, we have noticed an improved diversification over the past years. The Remodulin and the Tyvaso represent the biggest chunk of their revenues, but new coming medicines like the Adcirca or the Orenitram have a potential of revenue growth in the next years.

    UTHR products are principally sold in the United States, as shows the geographic repartition chart on the top right of the screen. In fact, 92% of their revenues are made in the U.S., while the other 8% are generated mostly Europe.

    In total, United Therapeutics has generated more than 1.46 billion of US dollars in 2015, a number which is expected to grow in 2016 and 2017.
  • According to the report published by Grand View Research, global pulmonary arterial hypertension (PAH) market will reach $8.7 billion by 2025, incidents of PAH, increasing geriatric population, and government support to develop orphan drugs are key driving factors.

    The Pulmonary Arterial Hypertension (PAH) market is expected to reach USD 8.7 billion by 2025, according to the new report by Grand View Research, Inc. Incidents of PAH, increasing geriatric population, and government support to develop orphan drugs are key driving factors. Cumulatively, the cases of PAH are in the range of 100,000 to 200,000 per year. However, in the past few years, the prevalence of this disorder is rising due to risk factors like sedentary lifestyle, HIV, smoking, alcohol/tobacco consumption, and other idiopathic conditions. 

    The presence of a large population over 60 years globally, which has lower immunity levels and is prone to PAH and associated diseases, which is a high impact-rendering driver for the growth of the market over the forecast period. 
  • We enter into certain license agreements that generally prohibit our counterparties or their affiliates from taking necessary steps to acquire or merge with us, directly or indirectly throughout the term of these agreements, plus a specified period thereafter. We are also party to certain license agreements that restrict our ability to assign or transfer the rights licensed to us to third parties, including parties with whom we wish to merge, or those attempting to acquire us. These agreements often require that we obtain prior consent of the counterparties to these agreements if we are contemplating a change of control. If these counterparties withhold consent, related agreements could be terminated and we would lose related license rights. For example, both Lilly and Toray have the right to terminate our license agreements relating to Adcirca and esuberaprost, respectively, in the event of certain change of control transactions. These restrictive change of control provisions could impede or prevent mergers or other transactions that could benefit our shareholders.

    During the fourth quarter of 2015, we sold the rights to our glycobiology antiviral platform under terms that entitle us to milestone and royalty payments from the buyer in the event the program is successful. Additionally, during the fourth quarter of 2015, we terminated our license agreement with Pluristem Ltd. (Pluristem) relating to the development of a cell-based product for the treatment of PAH using Pluristem’s PLacental eXpanded (PLX) cells.

    In 2006, we entered into an exclusive license agreement with Supernus to use certain of its technologies in producing Orenitram. Under the agreement, we paid Supernus certain amounts upon the achievement of specified milestones based on the development and commercial launch of Orenitram for PAH, and we would be obligated to make additional milestone payments if we develop Orenitram for a second indication. In addition, the agreement provides that we will pay a single-digit royalty based on net worldwide sales. This royalty will be paid for approximately twelve years commencing with the first product sale and is subject to adjustments as specified in the agreement. The royalties commenced in the second quarter of 2014 with the first sale of Orenitram.

    Supernus License In 2006, we entered into an exclusive license agreement with Supernus to use certain of its technologies in producing Orenitram. Under the agreement, we paid Supernus certain amounts upon the achievement of specified milestones based on the development and commercial launch of Orenitram for PAH, and we would be obligated to make additional milestone payments if we develop Orenitram for a second indication. In addition, the agreement provides that we will pay a single-digit royalty based on net worldwide sales. This royalty will be paid for approximately twelve years commencing with the first product sale and is subject to adjustments as specified in the agreement. The royalties commenced in the second quarter of 2014 with the first sale of Orenitram. Lilly Agreements Related to Adcirca In 2008, we entered into several agreements with Lilly regarding Adcirca, including a license agreement and a manufacturing and supply agreement. License Agreement Under the terms of the license agreement, Lilly granted us an exclusive license for the right to develop, market, promote and commercialize Adcirca for the treatment of pulmonary hypertension in the United States. We agreed to pay Lilly royalties equal to five percent of our net product sales of Adcirca, as a pass through of Lilly’s third-party royalty obligations, for so long as Lilly is required to make such payments. Lilly retained the exclusive rights to develop, manufacture and commercialize pharmaceutical products containing tadalafil, the active pharmaceutical ingredient in Adcirca, for the treatment of pulmonary hypertension outside of the United States and for the treatment of other diseases worldwide. Lilly retained authority for all regulatory activities with respect to Adcirca and for setting the wholesale price of Adcirca, which has been and is expected to continue to be at price parity with Cialis. The license agreement will continue in effect until the later of: (1) expiration, lapse, cancellation, abandonment or invalidation of the last claim to expire within a Lilly patent covering the commercialization of Adcirca for the treatment of pulmonary hypertension in the United States; or 17 (2) expiration of any government-conferred exclusivity rights to use Adcirca for the treatment of pulmonary hypertension in the United States. We have the right to terminate the license agreement upon six months written notice to Lilly. Lilly has the right to terminate in the event of a change of control of our company. Either party may terminate upon a material breach by the other party of the license agreement or the manufacturing and supply agreement, described above. The U.S. patent for Adcirca for the treatment of pulmonary hypertension will expire in November 2017. Manufacturing and Supply Agreement Under the terms of the manufacturing and supply agreement, Lilly agreed to manufacture Adcirca and distribute it on our behalf via its pharmaceutical wholesaler network, in the same manner that it distributes its own pharmaceutical products. Under the terms of this agreement, we take title to Adcirca upon its manufacture by Lilly. Adcirca is shipped to customers, generally pharmaceutical wholesalers, in accordance with customers’ purchase orders received by Lilly. Lilly invoices and collects amounts due from the customer subject to customary discounts and rebates, if any, and remits the collections to us. Although Lilly is providing these services on our behalf, we maintain the risk of loss as it pertains to inventory, product returns and nonpayment of sales invoices. The manufacturing and supply agreement will continue in effect until expiration or termination of the license agreement. We also agreed to purchase Adcirca at a fixed manufacturing cost. The agreement provides a mechanism, generally related to the increase in the national cost of pharmaceutical manufacturing, pursuant to which Lilly may raise the manufacturing cost of Adcirca. Unituxin Proprietary Rights In 2010, we entered into a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) of the United States National Institutes for Health (NIH) to collaborate on the late-stage development and regulatory approval process for Unituxin for children with high-risk neuroblastoma and patients with other forms of cancer. In lieu of a royalty payment to the NCI, we have an ongoing obligation to provide the NCI with Unituxin for its studies free of charge. We previously received orphan drug designation for Unituxin from both the FDA and the EMA. Orphan designation, coupled with FDA approval of our BLA in March 2015, confers an exclusivity period through March 2022, during which the FDA may not approve any application to market the same drug for the same indication, except in limited circumstances. For further details, refer to the section above entitled Products to Treat Cancer—Unituxin.

    Medtronic Agreement In 2009, we entered into an exclusive agreement with Medtronic, which was amended in 2011, to collaborate on the development and commercialization of Medtronic’s proprietary intravascular infusion catheter to be used with Medtronic’s Synchromed II implantable infusion pump and related infusion system components (together referred to as the Remodulin Implantable System) in order to deliver Remodulin for the treatment of PAH in the United States, United Kingdom, Canada, France, Germany, Italy and Japan. Under the amended agreement, we have been working together at our expense to develop the Remodulin Implantable System, conduct a clinical trial (which was completed in 2013) and obtain regulatory approval for the use of Remodulin with the Remodulin Implantable System. If this development program is successful, our agreement provides that, upon commercialization, we will purchase infusion pumps and supplies from Medtronic and will also pay a royalty to Medtronic based on net product sales of Remodulin for use in the Remodulin Implantable System within the exclusive territories, subject to certain adjustments specified in the agreement. The 18 Remodulin Implantable System will be exclusive to Remodulin so long as we purchase a minimum percentage of our annual requirement for implantable pump systems from Medtronic. We will be solely responsible for all marketing and promotion of the Remodulin Implantable System for the delivery of Remodulin for the treatment of PAH in the exclusive territories. For further details, refer to the section above entitled Products to Treat Cardiopulmonary Diseases—Pulmonary Arterial Hypertension— Remodulin—Remodulin Implantable System.

    Toray Amended License Agreement In 2000, we licensed from Toray the exclusive right to develop and market beraprost for cardiovascular indications. Beraprost is a chemically stable oral prostacyclin analogue in a sustained release formulation, which is approved to treat PAH in Japan and certain other countries. This license gives us exclusive rights to develop beraprost and its variants (including esuberaprost) throughout North America, Europe, and certain other territories. We are currently developing esuberaprost under this license agreement. Pursuant to a March 2007 amendment to our license agreement with Toray, we issued 200,000 shares of our common stock to Toray. Toray has the right to request that we repurchase these shares (which have since split into 400,000 shares) upon 30 days prior written notice at the price of $27.21 per share. The 2007 amendment also provided for certain milestone payments during the development period and upon receipt of regulatory approval for beraprost in the United States or the EU. In 2011, we amended our license agreement with Toray to reduce the royalty rates in exchange for a total of $50.0 million in equal, non-refundable payments to Toray over the five-year period ending in 2015. As of December 31, 2015, this obligation was fully satisfied. Toray has the right to terminate the license agreement in the event of a change of control of our company under certain circumstances. For further details, refer to the section above entitled Products to Treat Cardiopulmonary Diseases— Pulmonary Arterial Hypertension—Esuberaprost.

    DEKA Agreement In December 2014, we entered into an exclusive agreement with DEKA to develop a pre-filled, semi-disposable pump system for subcutaneous delivery of Remodulin. Under the terms of the agreement, we are funding the development costs related to the semi-disposable pump system and will pay product fees and a single-digit royalty to DEKA based on commercial sales of the system and the Remodulin sold for use with the system. Our goal is to be in a position to receive FDA approval for this delivery system by the end of 2018. Other We are party to various other license agreements relating to therapies and technologies under development. These license agreements require us to make payments based on a percentage of sales if we are successful in commercially developing these therapies, and may require other payments upon the achievement of certain milestones.

  • Remodulin, Tyvaso and Orenitram Proprietary Rights We have a number of issued patents and pending patent applications covering the stable prostacyclin analogue known as treprostinil, which is the active pharmaceutical ingredient in Remodulin, Tyvaso and Orenitram. In January 1997, we acquired patents covering the use of treprostinil for PAH from GlaxoSmithKline PLC (formerly Glaxo Wellcome, Inc.) (Glaxo) in exchange for certain payments including a royalty on sales of any product containing treprostinil. All of these patents expired in October 2014, as did our royalty payment obligation to Glaxo. In October 1997, we filed patent applications for a new synthesis method for treprostinil in the United States, Europe and various other countries. These applications resulted in the grant of three patents in the United States, all of which expire in October 2017, as well as patents granted in a number of other countries which expire in October 2018. We continue to conduct research into new methods to synthesize treprostinil and have filed a number of additional patent applications relating to production of treprostinil, several of which have already been granted in the United States. One such patent was granted, expiring in 2028, and is listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book (see Orange Book below), for Remodulin, Tyvaso and Orenitram. In addition to the treprostinil patents noted above, we have other patents specific to our individual treprostinil-based products, including the following:

    • Remodulin. We have been granted three U.S. patents covering an improved diluent for Remodulin, which expire in 2028 and 2029. We have another patent covering intravenous administration of Remodulin with certain diluents, which expires in 2024. All four of these patents are listed in the Orange Book.

    • Tyvaso. We have been granted two U.S. patents, as well as patents in other countries, for Tyvaso that cover methods of treating PAH by inhaled delivery. These patents will expire in the United States in 2018 and in various countries throughout the world in 2020.

    • Orenitram. Our patents for Orenitram cover methods of use for treating PAH, orally administered formulations, controlled moisture storage and production methods, as well as those covering controlled release formulations licensed to us by Supernus Pharmaceuticals Inc. (Supernus). These patents will expire in the United States between 2024 and 2031 and in various countries throughout the world between 2024 and 2027. We have additional pending U.S. and international patent applications relating to Remodulin, Tyvaso and Orenitram. Orange Book In seeking approval of a drug through an NDA or BLA or upon issuance of new patents following approval of an NDA or BLA, applicants are required to submit to the FDA each patent that has claims covering the applicant’s product or a method of using the product. Each of the patents submitted is then published in the Orange Book. See Governmental Regulation—Hatch-Waxman Act below for further details. Remodulin currently has six unexpired Orange Book-listed patents with expiration dates ranging from 2017 to 2029. Tyvaso currently has four unexpired Orange Book listed patents with expiration dates ranging from 2017 to 2028. Orenitram currently has nine unexpired Orange Book listed patents with expiration dates ranging from 2017 to 2031. Additional patent applications are pending, and if granted, may be eligible for listing in the Orange Book.
    The U.S. patent for Adcirca for the treatment of pulmonary hypertension will expire in November 2017.

  • "Our financial performance continues its strength this quarter," said Martine Rothblatt, Ph.D., United Therapeutics' Chairman and Chief Executive Officer. "Our growth potential is higher than ever, with new programs in our pipeline for pulmonary hypertension associated with emphysema, fibrosis, heart failure and sickle cell disease. In addition we are launching the clinical development of our dinutuximab monoclonal antibody for small cell lung cancer and other high-risk forms of cancer with GD2 expressing cell tumors. Finally, our second generation parenteral drug delivery systems for treprostinil are continuing their march toward anticipated approvals in 2017 for implantable and 2018 for subcutaneous.“

    United Therapeutics (NASDAQ: UTHR) is planning for "substantial increases" to its research and development spending in the coming year, CEO Martine Rothblatt told investors Thursday.
    The pipeline includes programs for pulmonary hypertension associated with emphysema, fibrosis, heart failure and sickle cell disease. The company is also launching the clinical development of dinutuximab, a monoclonal antibody for small cell lung cancer and other high-risk forms of cancer with tumor, and a second generation drug delivery system for PAH drug treprostinil, which is expected to earn approval in 2017.
    United Therapeutics has expanded its focus in recent years from drugs to transplantable organs through subsidiary Lung Biotechnology, which preserves and restores donor lungs, making them viable for transplantation. The company also owns the U.S. arm of The Roslin Institute, which created Dolly the Sheep, the world's first mammal to be cloned from an adult cell.

    Pre-clinical
    RemoPro™ (pain-free subcutaneous Remodulin ®  prodrug)(2019)
    Manufactured Organs(2023)
    Unexisome™ (exosome stem cell) (2022)
     
    Phase II
    Ex-Vivo Lung Perfusion(2019)
     
    Phase II/III
    Dinutuximab (2019-2023)
    IRONS (2022)
    Aurora-GT™ (eNOS gene therapy) SAPPHIRE (2020)
    OreniCell™ (treprostinil)(2022)
     
    Phase III 
    Tysuberprost™  (esuberaprost in combination with Tyvaso)  BEAT (2019)
    Tyvaso-ILD™  (treprostinil) INCREASE (2020)
    RemoLiv™ (treprostinil) STARZL (2020)
    OreniLeft™ (treprostinil) SOUTHPAW (2021)
     
    Phase IV 
    OreniPlus™ 
    (Orenitram in combination with approved background therapy)
    FREEDOM-EV(2019)
     
    Pre-NDA
    RemUnity™ 
    (treprostinil)
    2018
     
    PMA resubmitted by Medtronic Oct. 2016. NDA to be resubmitted by UT early 2017.
    RemoSynch™  (Implantable System for Remodulin)         
    2017




  • SWOT Analysis
    Strengths
    ·      Diversity of pipeline
    ·      Large portion of revenue is patented until 2028/2029 Remodulin
    ·      Double digit growth rates 
    ·      Acquired treprostinil (ingredient for Tyvaso and Remodulin) patent from Glaxo in 2014-> no need to pay royal fee
    ·      Producing commercial products from drug making to pacaging , through their in-house production capabilities
     
                Weaknesses
    ·      Concentrations of their revenue from commercial product
    ·      License Agreements with other companies as opposed to M&A activity
    ·      The sufficiency of current and future working capital to support operations
    ·      FDA denied Pemodulin pump system in 2015 
    ·      Decrease the net product sale fot Tyvaso® by 7.6%
    ·      Increased new products cost of product sale ->Because the new launched product Orenitram's (Third most revenue generating product) cost of product sales as a percentage of its net product sales is significantly high -> If the sale increase it could be reduce cost of sale + Adcirca upon its manufacture and bear any losses related to the storage, distribution and sale of Adcirca.
     
    Opportunities
    ·      Increasing number of PAH patients 
    -       Idiopathic PAH (IPAH) has an annual incidence of 1–2 cases per million people in the US and Europe and is 2–4 times as common in women as in men.12,19 The mean age at diagnosis is around 45 years, although it can occur at any age.
    ·      FDA approval products
    ·      Global expansion 
    ·      R&D expansion
     
    Threats
    ·      Increased tariffs face potential loss in sales
    ·      Intellectual property protections and the validity and expiration dates of the patents they own or license;
    -       Among the challenges, United Therapeutics recently settled patent litigation that allows Novartis (NVS) and Teva Pharamaceutical Industries (TEVA) to launch generic versions of Remodulin in 2018. -> PAH is life threaten disease, therefore doctor not just change their prescriptions because of the cost.
    -       Tyvaso patents expire in 2018 in the U.S. United Therapeutics faces patent challenges on Tyvaso from Watson Laboratories, a unit of Allergan (AGN)
    -       SteadyMed Therapeutics on trepostrinil, the active ingredient in Remodulin, Tyvaso, and Orenitram
    ·      The impact of competing therapies on sales of their commercial products, including (1) the impact of generic products such as (a) generic sildenafil, which launched in 2012; (b) generic tadalafil, which may become available following patent expiry in November 2017; and (c) generic forms of subcutaneous and intravenous treprostinil, which they expect two generic companies will launch in June 2018 and December 2018; and (2) newly-developed therapies, such as Uptravi® (selexipag); 
    ·      The outcome of potential future regulatory actions, including audits and inspections, by the FDA and international regulatory agencies

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