Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 18, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | UNITED THERAPEUTICS Corp | |
Entity Central Index Key | 1,082,554 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 43,211,053 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 1,067.5 | $ 1,023 |
Marketable investments | 143.2 | 27.8 |
Accounts receivable, no allowance for 2017 and 2016 | 251.8 | 214.5 |
Inventories, net | 114.4 | 100 |
Other current assets | 62.3 | 59.5 |
Total current assets | 1,639.2 | 1,424.8 |
Marketable investments | 338.5 | 2.3 |
Goodwill and other intangible assets, net | 45.7 | 33.8 |
Property, plant and equipment, net | 521.7 | 489.3 |
Deferred tax assets, net | 177.9 | 178.3 |
Other non-current assets | 213 | 197.1 |
Total assets | 2,936 | 2,325.6 |
Current liabilities: | ||
Accounts payable and accrued expenses | 143.3 | 104.2 |
Line of credit | 250 | |
Share tracking awards plan | 145.1 | 194.8 |
Other current liabilities | 251 | 33.5 |
Total current liabilities | 789.4 | 332.5 |
Non-current liabilities | 57.5 | 130.9 |
Total liabilities | 846.9 | 463.4 |
Commitments and contingencies | ||
Temporary equity | 19.2 | 10.9 |
Stockholders' equity: | ||
Common stock, par value $.01, 245,000,000 shares authorized, 69,825,916 and 69,340,985 shares issued, and 43,206,700 and 42,965,856 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 0.7 | 0.7 |
Additional paid-in capital | 1,838.6 | 1,813.5 |
Accumulated other comprehensive loss | (16.8) | (16.8) |
Treasury stock, 26,619,216 and 26,375,129 shares at September 30, 2017 and December 31, 2016, respectively | (2,579.2) | (2,379.6) |
Retained earnings | 2,826.6 | 2,433.5 |
Total stockholders' equity | 2,069.9 | 1,851.3 |
Total liabilities and stockholders' equity | 2,936 | 2,325.6 |
Preferred stock | ||
Stockholders' equity: | ||
Preferred stock, par value $.01 , no shares issued | ||
Series A junior participating preferred stock | ||
Stockholders' equity: | ||
Preferred stock, par value $.01 , no shares issued |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts receivable, allowance (in dollars) | $ 0 | $ 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 245,000,000 | 245,000,000 |
Common stock, shares issued | 69,825,916 | 69,340,985 |
Common stock, shares outstanding | 43,206,700 | 42,965,856 |
Treasury stock, shares | 26,619,216 | 26,375,129 |
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Series A junior participating preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Net product sales | $ 445.5 | $ 408.2 | $ 1,260.6 | $ 1,189.8 |
Total revenues | 445.5 | 408.2 | 1,260.6 | 1,189.8 |
Operating expenses: | ||||
Cost of product sales | 19.5 | 23.6 | 52.7 | 44.3 |
Research and development | 55 | 45.9 | 151 | 80.7 |
Selling, general and administrative | 47.2 | 100.1 | 171 | 177.3 |
Estimated loss contingency | 210 | |||
Total operating expenses | 121.7 | 169.6 | 584.7 | 302.3 |
Operating income | 323.8 | 238.6 | 675.9 | 887.5 |
Other (expense) income: | ||||
Interest expense | (3.3) | (0.5) | (5.5) | (1.7) |
Other, net | 3.3 | 1 | 7.7 | 2.9 |
Impairment of cost method investment | (3.1) | (49.6) | ||
Total other (expense) income, net | (3.1) | 0.5 | (47.4) | 1.2 |
Income before income taxes | 320.7 | 239.1 | 628.5 | 888.7 |
Income tax expense | (44.4) | (77.3) | (229.6) | (285.3) |
Net income | $ 276.3 | $ 161.8 | $ 398.9 | $ 603.4 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 6.37 | $ 3.75 | $ 9 | $ 13.62 |
Diluted (in dollars per share) | $ 6.27 | $ 3.50 | $ 8.83 | $ 12.76 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 43.4 | 43.2 | 44.3 | 44.3 |
Diluted (in shares) | 44.1 | 46.2 | 45.2 | 47.3 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 276.3 | $ 161.8 | $ 398.9 | $ 603.4 |
Other comprehensive income: | ||||
Foreign currency translation (losses) gain | (1) | 0.2 | (2.8) | |
Defined benefit pension plan: | ||||
Actuarial (losses) gain arising during period, net of tax | (1.2) | (0.1) | 5.9 | |
Amortization of actuarial gain and prior service cost included in net periodic pension cost, net of tax | 0.1 | 0.1 | 0.4 | 0.5 |
Total defined benefit pension plan, net of tax | 0.1 | (1.1) | 0.3 | 6.4 |
Unrealized loss on available-for-sale securities | (0.3) | (0.5) | ||
Other comprehensive (losses) gain, net of tax | (0.2) | (2.1) | 3.6 | |
Comprehensive income | $ 276.1 | $ 159.7 | $ 398.9 | $ 607 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 398.9 | $ 603.4 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 23.3 | 23.8 |
Share-based compensation benefit | (45) | (93.2) |
Impairment of cost method investments | 49.6 | |
Estimated loss contingency | 210.9 | |
Other | (9.2) | 2.5 |
Excess tax benefits from share-based compensation | (4.6) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (37.3) | (31.7) |
Inventories | (17) | (12.9) |
Accounts payable and accrued expenses | 37.9 | 13.9 |
Other assets and liabilities | (52.1) | (21) |
Net cash provided by operating activities | 560 | 480.2 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (58.5) | (23.3) |
Proceeds from sale of property, plant and equipment | 8.3 | |
Purchases of held-to-maturity and other investments | (51.8) | (0.8) |
Maturities of held-to-maturity investments | 52.6 | 78.8 |
Purchases of available-for-sale investments | (452.6) | |
Purchase of investments held at cost | (55.3) | (7.6) |
Purchase of investments under the equity method | (2.1) | |
Consolidation of variable interest entity | 0.1 | |
Intangible assets acquired | (5.2) | |
Net cash (used in) provided by investing activities | (557.2) | 39.8 |
Cash flows from financing activities: | ||
Proceeds from line of credit | 250 | |
Principal payments of debt | (8.8) | |
Payments of debt issuance costs | (0.7) | (6.8) |
Payments to repurchase common stock | (250) | (395.5) |
Proceeds from the exercise of stock options | 38.2 | 6.2 |
Issuance of stock under employee stock purchase plan | 4 | 4.3 |
Excess tax benefits from share-based compensation | 4.6 | |
Net cash provided by (used in) financing activities | 41.5 | (396) |
Effect of exchange rate changes on cash and cash equivalents | 0.2 | (2.8) |
Net increase in cash and cash equivalents | 44.5 | 121.2 |
Cash and cash equivalents, beginning of period | 1,023 | 831.8 |
Cash and cash equivalents, end of period | 1,067.5 | 953 |
Supplemental cash flow information: | ||
Cash paid for interest | 3.8 | 0.1 |
Cash paid for income taxes | 250.6 | 283.7 |
Non-cash investing and financing activities: | ||
Non-cash additions to property, plant and equipment | $ 7.7 | 3.2 |
Issuance of common stock upon conversion of convertible notes | $ 7.5 |
Organization and Business Descr
Organization and Business Description | 9 Months Ended |
Sep. 30, 2017 | |
Organization and Business Description | |
Organization and Business Description | 1. Organization and Business Description United Therapeutics Corporation is a biotechnology company focused on the development and commercialization of innovative products to address the unmet medical needs of patients with chronic and life-threatening conditions. We have approval from the U.S. Food and Drug Administration (FDA) to market the following therapies: Remodulin ® (treprostinil) Injection (Remodulin), Tyvaso ® (treprostinil) Inhalation Solution (Tyvaso), Adcirca ® (tadalafil) Tablets (Adcirca), Orenitram ® (treprostinil) Extended-Release Tablets (Orenitram) and Unituxin ® (dinutuximab) Injection (Unituxin). Our only significant revenues outside the United States are derived from sales of Remodulin in Europe. As used in these notes to the consolidated financial statements, unless the context otherwise requires, the terms “we”, “us”, “our”, and similar terms refer to United Therapeutics Corporation and its consolidated subsidiaries. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 22, 2017. In our management’s opinion, the accompanying consolidated financial statements contain all adjustments, including normal, recurring adjustments, necessary to fairly present our financial position as of September 30, 2017, statements of operations and statements of comprehensive income for the three- and nine-month periods ended September 30, 2017 and September 30, 2016 and statements of cash flows for the nine-month periods ended September 30, 2017 and September 30, 2016. Interim results are not necessarily indicative of results for an entire year. Recently Issued Accounting Standards Accounting Standards Adopted During the Period In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, Simplifying the Measurement of Inventory (ASU 2015-11), which requires that inventory be measured at the lower of cost or net realizable value for entities using first-in, first-out or average cost methods. ASU 2015-11 should be applied prospectively and is effective for fiscal years beginning after December 15, 2016, and for interim periods within those fiscal years. We adopted this standard on January 1, 2017, with no material impact on our financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (ASU 2016-09), which serves to simplify the accounting for share-based payment transactions. ASU 2016-09 includes guidance on several aspects of the accounting for share-based payments, including the income tax consequences, forfeitures and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and for interim periods within those fiscal years. We adopted this standard on January 1, 2017. Upon adoption of ASU 2016-09, we began to recognize excess tax benefits as income tax benefits on our consolidated statements of operations. Previously, we recognized such amounts in additional paid-in capital on our consolidated balance sheets. Additionally, on January 1, 2017, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment resulted in a decrease to retained earnings of $5.8 million, which is net of a $3.2 million tax benefit. The guidance also requires that we classify excess tax benefits as an operating activity in our consolidated statements of cash flows, whereas we previously classified such amounts as a financing activity. These amounts are now classified as “other” in our cash flows from operating activities. We have adopted ASU 2016-09 on a prospective basis and, as such, prior periods have not been adjusted, with the exception of the cumulative-effect adjustment to retained earnings for the removal of the forfeiture estimate, which was adopted on a modified retrospective basis. Refer to Note 7 —Share Tracking Awards Plans, Note 9 —Stockholders’ Equity—Stock Options and Note 10 —Income Taxes . Accounting Standards Not Yet Adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), and subsequent clarifying guidance. This guidance eliminates transaction-specific and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach for determining revenue recognition. This guidance requires that companies recognize revenue based on the value of transferred goods or services as they occur in accordance with the contract. In addition, disclosure is required about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new standard is required to be applied either retrospectively to each prior reporting period presented (“full retrospective approach”) or retrospectively with the cumulative effect of initial application recognized at the date of initial application (“modified retrospective approach”). The new standard is effective for reporting periods beginning after December 15, 2017. We have completed the review of our revenue contract portfolio and do not believe adoption of the new standard will have a material impact on the timing or measurement of our revenue. We are finalizing our revenue accounting policy and other revenue-related documentation and implementing changes to our business processes and controls in preparation for adoption of the new standard. We will adopt the requirements of the new standard in the first quarter of 2018 using the modified retrospective method. The modified retrospective method requires companies to recognize the cumulative effect of initially applying the new standard as an adjustment to opening retained earnings. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires equity investments to be measured at fair value through net income. Equity investments that are accounted for under the equity method are not impacted. ASU 2016-01 provides that equity investments without readily determinable fair values can be valued at cost minus impairment using a simplified impairment assessment that utilizes qualitative assessments. ASU 2016-01 requires separate presentation of the financial assets and liabilities by category and form. ASU 2016-01 should be applied prospectively and will be effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. We will adopt the requirements of the new standard in the first quarter of 2018 and do not currently expect adoption to have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which requires that lease assets and lease liabilities be recognized on the balance sheet. ASU 2016-02 also requires additional quantitative and qualitative disclosures that provide the amount, timing, and uncertainty of cash flows relating to lease arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. The modified retrospective approach requires retrospective application to the earliest period presented in the respective financial statements, provides certain practical expedients related to leases that commenced prior to the effective date and allows the use of hindsight when evaluating lease options. Early adoption is permitted. We are currently evaluating the effect of adoption on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which reduces existing diversity in the classification of certain cash receipts and cash payments on the statements of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. We will adopt the requirements of the new standard in the first quarter of 2018 and do not currently expect adoption to have a material impact on our financial statements. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), which requires that an entity recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017 using a modified retrospective approach through a cumulative adjustment to retained earnings as of the beginning of the period of adoption. We will adopt the requirements of the new standard in the first quarter of 2018 and do not currently expect adoption to have a material impact on our financial statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations-Clarifying the Definition of a Business (ASU 2017-01). This update narrows the definition of a business by providing a screen to determine when an integrated set of assets and activities is not a business. The screen specifies that an integrated set of assets and activities is not a business if substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single asset or a group of similar identifiable assets. ASU 2017-01 should be applied prospectively and is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those fiscal years. We will adopt the requirements of the new standard in the first quarter of 2018 and do not currently expect adoption to have a material impact on our financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (ASU 2017-04), which simplifies how an entity is required to test goodwill for impairment. A goodwill impairment will be measured by the amount by which a reporting unit’s carrying value exceeds its fair value, with the amount of impairment not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, and must be adopted on a prospective basis. Early adoption is permitted. We are currently evaluating the effect of adoption on our financial statements. In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (ASU 2017-07), which improves the presentation of net periodic pension cost and net periodic post-retirement benefit cost. For employers that present a measure of operating income in their statement of income, ASU 2017-07 requires employers to include only the service cost component of net periodic pension cost and net periodic post-retirement benefit cost in operating expense along with other employee compensation costs. Under ASU 2017-07, the service cost component of net benefit cost is eligible for capitalization. Additionally, this update further requires other components of net benefit cost to be included in non-operating expenses. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. An entity is to apply the change in income statement presentation retrospectively, and the change in capitalized benefit cost prospectively. We will adopt the requirements of the new standard in the first quarter of 2018 and do not currently expect adoption to have a material impact on our financial statements. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2017 | |
Investments | |
Investments | 3. Investments Available-for-Sale Investments Marketable investments classified as available-for-sale consisted of the following (in millions): As of September 30, 2017 Amortized Gross Fair U.S. government and agency securities $ $ ) $ Total $ $ ) $ Reported under the following captions on the consolidated balance sheet: Cash and cash equivalents $ Current marketable investments Non-current marketable investments Total $ We had no available-for-sale investments as of December 31, 2016. The following table summarizes the contractual maturities of available-for-sale marketable investments (in millions): September 30, 2017 Amortized Fair Due in less than one year $ $ Due in one to two years Due in three to five years Total $ $ Held-to-Maturity and Other Investments Our current and long-term marketable investments included $29.3 million and $30.1 million of investments classified as held-to-maturity as of September 30, 2017 and December 31, 2016, respectively. Marketable investments classified as held-to-maturity are comprised of government-sponsored enterprises and corporate notes and bonds. We do not intend to sell these securities, nor is it more likely than not that we will be required to sell them prior to the recovery of their amortized cost basis. Furthermore, we do not believe that these securities expose us to undue market risk or counterparty credit risk. As such, we do not consider these securities to be other than temporarily impaired. Investments Held at Cost As of September 30, 2017, we maintain non-controlling equity investments in privately-held companies of approximately $178.9 million in the aggregate. These investments are initially held at cost because we do not have the ability to exercise significant influence over these companies and their fair values are not readily determinable. During the three- and nine-month periods ended September 30, 2017, we made payments of $30.2 million and $55.3 million, respectively, for investments held at cost. We include our investments held at cost within other non-current assets on our consolidated balance sheets. These investments are subject to a periodic impairment review and if they are deemed to be other-than-temporarily impaired, the investment is measured and recorded at fair value. During the three-and nine-month periods ended September 30, 2017, we recorded $3.1 million and $49.6 million, respectively, of impairment charges related to our cost method investments in privately-held companies. Variable Interest Entity In April 2017, we made a $7.5 million minority investment in a privately-held company. In addition to our investment, we entered into an exclusive license, development and commercialization agreement (the License Agreement) with this company. The License Agreement entitles us to certain control rights that require us to consolidate the balance sheet and results of operations of this company. The control rights relate to additional research and development funding that we may provide to this company over a period of six years. We are also entitled to representation on a joint development committee that approves the company’s use of funding provided by us. In April 2017, we provided $5.2 million of financial support to the company. We have the right, at any time and for any reason, to cease our funding of this company’s activities. As of September 30, 2017, our consolidated balance sheet included $9.6 million of cash maintained by this company that can only be used to settle its obligations. Additionally, our consolidated balance sheets included an $8.8 million in-process research and development intangible asset, $3.4 million of goodwill and $8.3 million of preferred stock due to the consolidation of this company. The preferred stock is recorded in temporary equity on our consolidated balance sheets. During the quarter ended September 30, 2017, this company incurred a net loss of $1.5 million. This company’s creditors have no recourse against our assets and general credit. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements We account for certain assets and liabilities at fair value and classify these assets within a fair value hierarchy (Level 1, Level 2 or Level 3). Our other current assets and our current liabilities have fair values that approximate their carrying values. Assets and liabilities subject to fair value measurements are as follows (in millions): As of September 30, 2017 Level 1 Level 2 Level 3 Balance Assets Money market funds (1) $ $ — $ — $ Time deposits (2) — — U.S. government and agency securities (2) — — Corporate debt securities (2) — — Total assets $ $ $ — $ Liabilities Contingent consideration (3) — — Total liabilities $ — $ — $ $ As of December 31, 2016 Level 1 Level 2 Level 3 Balance Assets Money market funds (1) $ $ — $ — $ U.S. government and agency securities (2) — — Corporate debt securities (2) — — Total assets $ $ $ — $ Liabilities Contingent consideration (3) — — Total liabilities $ — $ — $ $ (1) Included in cash and cash equivalents on the accompanying consolidated balance sheets. (2) Included in cash equivalents and current and non-current marketable investments on the accompanying consolidated balance sheets. The fair value of these securities is principally measured or corroborated by trade data for identical securities in which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded. (3) Included in non-current liabilities on the accompanying consolidated balance sheets. The fair value of contingent consideration has been estimated using probability-weighted discounted cash flow models (DCFs). The DCFs incorporate Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to each acquisition agreement. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short maturities. The fair values of our marketable investments are reported above within the fair value hierarchy. Refer to Note 3 —Investments. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2017 | |
Inventories | |
Inventories | 5. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following, net of reserves (in millions): September 30, December 31, Raw materials $ $ Work-in-progress Finished goods Total inventories $ $ |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 6. Goodwill and Other Intangible Assets Goodwill and other intangible assets comprise the following (in millions): As of September 30, 2017 As of December 31, 2016 Gross Accumulated Net Gross Accumulated Net Goodwill $ $ — $ $ $ — $ Other intangible assets: Technology, patents and trade names ) ) In-process research and development — — Customer relationships and non-compete agreements ) — ) Total $ $ ) $ $ $ ) $ |
Share Tracking Awards Plans
Share Tracking Awards Plans | 9 Months Ended |
Sep. 30, 2017 | |
Share Tracking Awards Plans | |
Share Tracking Awards Plans | 7. Share Tracking Awards Plans We previously issued awards under the United Therapeutics Corporation Share Tracking Awards Plan, adopted in June 2008 (2008 STAP) and the United Therapeutics Corporation 2011 Share Tracking Awards Plan, adopted in March 2011 (2011 STAP). We refer to the 2008 STAP and the 2011 STAP collectively as the “STAP” and awards outstanding under either of these plans as “STAP awards.” STAP awards convey the right to receive in cash an amount equal to the appreciation of our common stock, which is measured as the increase in the closing price of our common stock between the dates of grant and exercise. STAP awards expire on the tenth anniversary of the grant date and, in most cases, they vest in equal increments on each anniversary of the grant date over a four-year period. Our STAP liability includes vested awards and awards that are expected to vest. We recognize expense for awards that are expected to vest during the vesting period. We discontinued the issuance of STAP awards in June 2015. Our aggregate STAP liability balance was $146.0 million and $268.9 million at September 30, 2017 and December 31, 2016, respectively, of which $0.9 million and $74.1 million, respectively, has been classified as other non-current liabilities on our consolidated balance sheets based on the vesting terms of the underlying STAP awards. The decrease in our STAP liability classified as non-current liabilities is primarily due to a tranche of STAP awards with a fair value of $60.7 million at September 30, 2017 that is expected to vest within one year, and therefore is now classified as a current liability. Estimating the fair value of STAP awards requires the use of certain inputs that can materially impact the determination of fair value and the amount of compensation expense (benefit) we recognize. Inputs used in estimating fair value include the price of our common stock, the expected volatility of the price of our common stock, the risk-free interest rate, the expected term of STAP awards and the expected dividend yield. We measure the fair value of outstanding STAP awards at the end of each financial reporting period because the awards are settled in cash. As a result of the adoption of ASU 2016-09, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment increased our STAP liability by $8.4 million and decreased retained earnings by $5.4 million, net of tax. Refer to Note 2 —Basis of Presentation—Recently Issued Accounting Standards . The table below includes the weighted-average assumptions used to measure the fair value of the outstanding STAP awards: September 30, September 30, Expected volatility % % Risk-free interest rate % % Expected term of awards (in years) Expected dividend yield % % The closing price of our common stock was $117.19 and $118.08 on September 30, 2017 and September 30, 2016, respectively. The closing price of our common stock was $143.43 on December 31, 2016. A summary of the activity and status of STAP awards during the nine-month period ended September 30, 2017 is presented below: Number of Weighted Weighted Aggregate Outstanding at January 1, 2017 $ Granted — — Exercised ) Forfeited ) Outstanding at September 30, 2017 $ $ Exercisable at September 30, 2017 $ $ Unvested as of September 30, 2017 $ $ Share-based compensation (benefit) expense recognized in connection with STAP awards is as follows (in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of product sales $ ) $ $ ) $ ) Research and development ) ) ) Selling, general and administrative ) ) ) Share-based compensation (benefit) expense before taxes $ ) $ $ ) $ ) Related income tax expense (benefit) ) Share-based compensation (benefit) expense, net of taxes $ ) $ $ ) $ ) Cash paid to settle STAP awards exercised during the nine-month periods ended September 30, 2017 and September 30, 2016 was $54.1 million and $52.7 million, respectively. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt | |
Debt | 8. Debt Unsecured Revolving Credit Facility In January 2016, we entered into a credit agreement (the 2016 Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent and a swingline lender, and various other lender parties, providing for an unsecured revolving credit facility of up to $1.0 billion. In accordance with the terms of the 2016 Credit Agreement, in January 2017 we extended the maturity date of the 2016 Credit Agreement by one year, to January 2022. At our option, amounts borrowed under the 2016 Credit Agreement bear interest at either the LIBOR rate or a fluctuating base rate, in each case, plus an applicable margin determined on a quarterly basis based on our consolidated ratio of total indebtedness to EBITDA (as calculated in accordance with the 2016 Credit Agreement). On June 1, 2017, we borrowed $250.0 million under this facility and used the funds to initiate an accelerated share repurchase program. Refer to Note 9 —Stockholders’ Equity—Share Repurchase. Although our credit facility matures in 2022, we classified the debt as a current liability on our consolidated balance sheet as we intend to repay the borrowed amount within one year. We elected to have interest on this draw calculated at LIBOR plus an applicable margin. During the three- and nine-month periods ended September 30, 2017, we recorded $2.1 and $3.7 million, respectively, of interest expense related to the credit facility. The 2016 Credit Agreement contains customary events of default and customary affirmative and negative covenants. As of September 30, 2017, we were in compliance with such covenants. Lung Biotechnology PBC is our only subsidiary that guarantees our obligations under the 2016 Credit Agreement though, from time to time, one or more of our other subsidiaries may be required to guarantee such obligations. Convertible Notes and Warrant Transactions In October 2011, we issued $250.0 million in aggregate principal value 1.0 percent Convertible Senior Notes due September 15, 2016 (Convertible Notes). Upon maturity of the Convertible Notes in September 2016, we fulfilled all remaining settlement and repayment obligations. In connection with the issuance of the Convertible Notes, we sold to Deutsche Bank AG London (DB London) warrants to acquire up to approximately 5.2 million shares of our common stock at a strike price of $67.56 per share. The warrants expired incrementally on a series of expiration dates during December 2016 and January 2017. The warrants were settled on a net-share basis. As the price of our common stock exceeded the strike price of the warrants on the series of related incremental expiration dates, we delivered 2.8 million shares of common stock previously held as treasury stock to DB London, including 1.7 million shares that were delivered during the first quarter of 2017. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | 9. Stockholders’ Equity Earnings Per Common Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, adjusted for the potential dilutive effect of other securities if such securities were converted or exercised. The components of basic and diluted earnings per common share comprised the following (in millions, except per share amounts): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator: Net income $ $ $ $ Denominator: Weighted average outstanding shares — basic Effect of dilutive securities (1) : Warrants — Stock options, restricted stock units and employee stock purchase plan Weighted average shares — diluted (2) Net income per common share: Basic $ $ $ $ Diluted $ $ $ $ Stock options, convertible notes and warrants excluded from calculation (2) (1) Calculated using the treasury stock method. (2) Certain stock options and warrants have been excluded from the computation of diluted earnings per share because their impact would be anti-dilutive for the three- and nine-month periods ended September 30, 2017 and September 30, 2016. Additionally, certain convertible notes were excluded for the three- and nine-month periods ended September 30, 2016. Under our convertible note hedge agreement, we were entitled to receive shares required to be issued to investors upon conversion of our Convertible Notes. Since related shares used to compute dilutive earnings per share would be anti-dilutive, they have been excluded from the calculation above. Equity Incentive Plans As of September 30, 2017, we have two shareholder-approved equity incentive plans: the United Therapeutics Corporation Amended and Restated Equity Incentive Plan (the 1999 Plan) and the United Therapeutics Corporation 2015 Stock Incentive Plan (the 2015 Plan). The 2015 Plan was approved by our shareholders in June 2015 and provides for the issuance of up to 6,150,000 shares of our common stock pursuant to awards granted under the 2015 Plan. The 2015 Plan is a broad-based stock incentive plan enabling us to grant stock options and other forms of equity compensation to our employees and non-employee directors. As a result of the approval of the 2015 Plan, no further awards will be granted under the 1999 Plan. During the nine-month periods ended September 30, 2017 and September 30, 2016, we granted 2.0 million and 1.6 million stock options under the 2015 Plan, respectively. Stock Options We estimate the fair value of stock options using the Black-Scholes-Merton valuation model, which requires us to make certain assumptions that can materially impact the estimation of fair value and related compensation expense. The assumptions used to estimate fair value include the price of our common stock, the expected volatility of our common stock, the risk-free interest rate, the expected term of stock option awards and the expected dividend yield. As a result of the adoption of ASU 2016-09, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment decreased retained earnings by $0.4 million, net of tax. Refer to Note 2 —Basis of Presentation—Recently Issued Accounting Standards . In March 2017, we began issuing stock options with performance conditions under the 2015 Plan to certain executives. The awards have vesting conditions tied to the achievement of specified performance conditions. The performance conditions have target performance levels that span from one to three years. Upon the conclusion of the performance period, the performance level achieved will be measured and the ultimate number of shares that may vest will be determined. Share-based compensation expense for these awards is recorded ratably over their vesting period, depending on the specific terms of the award and achievement of the specified performance conditions. During 2017, we have granted 0.9 million stock options with performance vesting conditions with a total grant date fair value of $53.9 million based on achievement of target performance levels. During the three-and nine-month periods ended September 30, 2017, we recorded $5.7 million and $11.2 million, respectively, of share-based compensation expense related to these awards. The table below includes the weighted-average assumptions used to measure the fair value of all stock options (including both time-vesting and performance-vesting awards) granted during the nine-month periods ended September 30, 2017 and September 30, 2016: September 30, September 30, Expected volatility % % Risk-free interest rate % % Expected term of awards (in years) Expected dividend yield % % A summary of the activity and status of stock options under our equity incentive plans during the nine-month period ended September 30, 2017 is presented below: Number of Weighted- Weighted Aggregate Outstanding at January 1, 2017 $ Granted Exercised ) Forfeited/canceled ) Outstanding at September 30, 2017 $ $ Exercisable at September 30, 2017 $ $ Unvested as of September 30, 2017 $ $ The weighted average fair value of a stock option granted during each of the nine-month periods ended September 30, 2017 and September 30, 2016, was $56.07 and $42.55, respectively. These stock options have an aggregate grant date fair value of $109.8 million and $69.2 million, respectively. The total fair value of stock options that vested during the nine-month periods ended September 30, 2017 and September 30, 2016 was $13.1 million and $19.9 million, respectively. Stock option exercise data is summarized below (dollars in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Number of options exercised Cash received $ $ $ $ Total intrinsic value of options exercised $ $ $ $ Total share-based compensation expense relating to stock options is as follows (in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of product sales $ $ $ $ Research and development Selling, general and administrative Share-based compensation expense before taxes Related income tax benefit ) ) ) ) Share-based compensation expense, net of taxes $ $ $ $ As of September 30, 2017, unrecognized compensation cost was $114.5 million. Unvested outstanding stock options as of September 30, 2017 had a weighted average remaining vesting period of 2.6 years. Restricted Stock Units In June 2016, we began issuing restricted stock units under the 2015 Plan to our non-employee directors. In October 2017, we also began issuing restricted stock units to employees. Over time, we expect to increase the percentage of our equity awards made to employees in the form of restricted stock units, instead of stock options. Each restricted stock unit entitles the recipient to receive one share of our common stock upon vesting. We measure the fair value of restricted stock units using the stock price on the date of grant. Share-based compensation expense for the restricted stock units is recorded ratably over their vesting period. During the nine months ended September 30, 2017, we granted 17,820 restricted stock units under the 2015 Plan with a weighted average grant date fair value of $132.30. These restricted stock units had an aggregate grant date fair value of $2.4 million. We recorded $1.6 million and $0.6 million in share-based compensation expense related to restricted stock units for the nine-month periods ended September 30, 2017 and September 30, 2016, respectively. The share-based compensation expense related to restricted stock units granted to non-employee directors is reflected in selling, general and administrative expense on our statements of operations. As of September 30, 2017, unrecognized compensation cost related to the grant of restricted stock units was $1.7 million. Unvested outstanding restricted stock units as of September 30, 2017 had a weighted average remaining vesting period of 0.7 years. Share Repurchase In April 2017, our Board of Directors approved a share repurchase program authorizing up to $250.0 million in aggregate repurchases of our common stock. Pursuant to this authorization, in May 2017, we paid $250.0 million to enter into an accelerated share repurchase agreement (ASR) with Citibank, N.A. (Citibank). Pursuant to the terms of the ASR, in June 2017, Citibank delivered to us approximately 1.7 million shares of our common stock, representing the minimum number of shares we were entitled to receive under the ASR. The ASR was originally scheduled to terminate during the fourth quarter of 2017; however, in September 2017, Citibank notified us of its election to accelerate the termination date of the contract to September 8, 2017. Upon termination of the ASR, Citibank delivered to us approximately 0.3 million additional shares of our common stock. The ASR was accounted for as an equity transaction and the shares we repurchased under the ASR were included in treasury stock when the shares were received. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Income Taxes | 10. Income Taxes Our effective income tax rate (ETR) for the nine months ended September 30, 2017 and September 30, 2016 was 37 percent and 32 percent, respectively. Our 2017 ETR increased compared to 2016 primarily due to the following expenses incurred during the nine months ended September 30, 2017: (1) the nondeductible portion of a $210.0 million loss contingency accrual; and (2) the impairment charges related to two of our investments held at cost that are not currently deductible for tax purposes. During the second quarter of 2017, we recorded a $210.0 million accrual relating to an ongoing investigation by the U.S. Department of Justice. During the second quarter, we did not recognize any tax benefit relating to this accrual, because at the time we did not have sufficient information to indicate it would be tax deductible. During the third quarter of 2017, we received additional information supporting recognition of a tax benefit of $57.0 million related to a portion of this accrual. Refer to Note 12 —Litigation . During the nine months ended September 30, 2017, we recorded $49.6 million of impairment charges related to two of our investments held at cost. The impairment charges are not currently deductible for tax purposes, so we recorded a deferred tax asset of $18.3 million. We evaluated potential future sources of income of the appropriate character to determine whether the deferred tax asset was realizable and have not found sufficient sources of capital gains to offset the deferred tax asset. Therefore, the deferred tax asset must be fully reserved with a valuation allowance. The impact of this valuation allowance on our ETR as of September 30, 2017 is 3 percent and the anticipated impact on our ETR for 2017 is 2 percent. We are subject to federal and state taxation in the United States as well as various foreign jurisdictions. We are no longer subject to income tax examinations by the Internal Revenue Service and substantially all other major jurisdictions for tax years prior to 2011. As of both September 30, 2017 and September 30, 2016, our uncertain tax positions were $0.5 million. Unrecognized tax benefits as of both September 30, 2017 and September 30, 2016, included $0.3 million of tax benefits that, if recognized, would impact our ETR. We record interest and penalties related to uncertain tax positions as a component of income tax expense. As of both September 30, 2017 and September 30, 2016, we have not accrued any interest expense related to uncertain tax positions. We are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. As a result of the adoption of ASU 2016-09 in the first quarter of 2017, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment resulted in a $3.2 million tax benefit to reduce retained earnings. Additionally, we now recognize excess tax benefits as income tax benefits on our consolidated statements of operations. For the nine months ended September 30, 2017, we recognized excess tax benefits of $4.4 million, partially offsetting income tax expenses on our consolidated statements of operations. Previously, we recognized such amounts in additional paid-in capital on our consolidated balance sheets. Refer to Note 2 —Basis of Presentation—Recently Issued Accounting Standards . |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Segment Information | 11. Segment Information We currently operate as one operating segment with a focus on the development and commercialization of products to address the unmet needs of patients with chronic and life-threatening conditions. Our Chief Executive Officer, as our chief operating decision maker, manages and allocates resources to the operations of our company on a consolidated basis. This enables our Chief Executive Officer to assess the overall level of resources available and how to best deploy these resources across functions, therapeutic areas, and research and development projects that are in line with our long-term company-wide strategic goals. Net product sales, cost of product sales and gross profit for each of our commercial products were as follows (in millions): Three Months Ended September 30, 2017 Remodulin Tyvaso Adcirca Orenitram Unituxin Total Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ 2016 Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ Nine Months Ended September 30, 2017 Remodulin Tyvaso Adcirca Orenitram Unituxin Total Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ 2016 Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ |
Litigation
Litigation | 9 Months Ended |
Sep. 30, 2017 | |
Litigation | |
Litigation | 12. Litigation Watson Laboratories, Inc. In June 2015, we received a Paragraph IV certification notice letter from Watson Laboratories, Inc. (Watson) indicating that Watson has submitted an abbreviated new drug application (ANDA) to the FDA to market a generic version of Tyvaso. In its notice letter, Watson states that it intends to market a generic version of Tyvaso before the expiration of U.S. Patent Nos. 6,521,212 and 6,756,033, each of which expires in November 2018; and U.S. Patent No. 8,497,393, which expires in December 2028. Watson’s notice letter states that the ANDA contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the proposed product described in Watson’s ANDA submission. We responded to the Watson notice letter by filing a lawsuit in July 2015 against Watson in the U.S. District Court for the District of New Jersey alleging infringement of U.S. Patent Nos. 6,521,212, 6,756,033, and 8,497,393. Under the Hatch-Waxman Act, the FDA is automatically precluded from approving Watson’s ANDA for up to 30 months from receipt of Watson’s notice letter or until the issuance of a U.S. District Court decision that is adverse to us, whichever occurs first. In September 2015, Watson filed (1) a motion to dismiss some, but not all, counts of the complaint; (2) its answer to our complaint; and (3) certain counterclaims against us. The District Court granted Watson’s motion to dismiss certain counts of our complaint. In September 2015, we filed our answer to Watson’s counterclaims. In June 2016, Watson sent us a second Paragraph IV certification notice letter addressing two new patents, U.S. Patent Nos. 9,339,507 (the ’507 patent) and 9,358,240 (the ’240 patent), which expire in March and May 2028, respectively. In June 2016, we filed an amended complaint against Watson asserting these two additional patents. In June 2017, Watson filed petitions with the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office for inter partes review (IPR), seeking to invalidate the ’507 patent and ’240 patent. On October 13, 2017, we filed preliminary responses to the petitions, and the PTAB has three months to decide whether to institute IPR proceedings. Trial in the District Court on all of the asserted patents was scheduled to take place in September 2017. The parties, however, asked the District Court to stay the case until 14 days after the PTAB resolves Watson’s IPR petitions either by declining to institute the IPRs or by issuing a final written decision on the merits. The District Court granted the request staying the case, and as such trial will not occur until sometime after the stay is lifted. The stay could be lifted as early as January 2018 if the IPRs are not instituted. If one or both IPRs are instituted, then the stay will not be lifted until there is a final written decision by the PTAB, which we would expect within a year of the IPR(s) being instituted. We intend to vigorously enforce our intellectual property rights relating to Tyvaso. Actavis Laboratories FL, Inc. In February 2016, we received a Paragraph IV certification notice letter (the First Actavis Notice Letter) from Actavis Laboratories FL, Inc. (Actavis) indicating that Actavis has submitted an ANDA to the FDA to market a generic version of the 2.5 mg strength of Orenitram. The First Actavis Notice Letter states that Actavis intends to market a generic version of the 2.5 mg strength of Orenitram before the expiration of the following patents, all of which are listed in the Orange Book: U.S. Patent No. Expiration Date 8,252,839 May 2024 9,050,311 May 2024 7,544,713 July 2024 7,417,070 July 2026 8,497,393 December 2028 8,747,897 October 2029 8,410,169 February 2030 8,349,892 January 2031 The First Actavis Notice Letter states that the ANDA contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the proposed product described in Actavis’ ANDA submission. We responded to the First Actavis Notice Letter by filing a lawsuit (the First Actavis Action) against Actavis in March 2016 in the U.S. District Court for the District of New Jersey alleging infringement of each of the patents noted above and one additional patent, U.S. Patent No. 9,278,901 (the ’901 patent), which expires in May 2024 and is also now listed in the Orange Book. Under the Hatch-Waxman Act, the FDA is automatically precluded from approving Actavis’ ANDA with respect to the 2.5 mg strength of Orenitram for up to 30 months from receipt of Actavis’ notice letter or until the issuance of a U.S. District Court decision that is adverse to us with respect to all of the eight patents listed in the table above, whichever occurs first. In June 2016, we filed an amended complaint against Actavis, Actavis filed its answer and counterclaims to that amended complaint, and we filed our answer to those counterclaims. In May 2016, we received a second Paragraph IV certification notice letter from Actavis (the Second Actavis Notice Letter) indicating that Actavis has amended its ANDA to include its generic version of the 0.25 mg and 1.0 mg strengths of Orenitram, in addition to the 2.5 mg strength identified in the First Actavis Notice Letter. We responded to the Second Actavis Notice Letter by filing an additional lawsuit against Actavis (the Second Actavis Action) in June 2016 in the U.S. District Court for the District of New Jersey alleging infringement of the same patents asserted in the First Actavis Action. The Second Actavis Action triggered an additional 30-month stay with respect to the 0.25 mg and 1.0 mg strengths. Specifically, the FDA is automatically precluded from approving Actavis’ ANDA with respect to the 0.25 mg and 1.0 mg strengths of Orenitram for up to 30 months from receipt of the Second Actavis Notice Letter or until the issuance of a U.S. District Court decision that is adverse to us with respect to all of the nine patents noted above, whichever occurs first. We filed a second amended complaint against Actavis in September 2016, to allege infringement of two patents that were not issued and listed in the Orange Book at the time of the First and Second Actavis Notice Letters, but are now listed: U.S. Patent Nos. 9,393,203, which expires in April 2026, and 9,422,223, which expires in May 2024. The Court has consolidated the First Actavis Action and the Second Actavis Action. The parties are currently engaged in discovery, and trial on all patents is scheduled for February 2018. We intend to vigorously enforce our intellectual property rights relating to Orenitram. SteadyMed Ltd. In October 2015, SteadyMed Ltd. (SteadyMed) filed an IPR petition with the PTAB seeking to invalidate U.S. Patent No. 8,497,393 (the ’393 Patent), which expires in December 2028 and covers a method of making treprostinil, the active pharmaceutical ingredient in Remodulin, Tyvaso and Orenitram. The ’393 Patent was also the subject of now-settled litigation with generic companies relating to ANDAs to market generic versions of Remodulin, and remains the subject of our pending litigation with Watson and Actavis, described above. In June 2017, SteadyMed submitted a new drug application (NDA) to FDA seeking approval of a product called Trevyent ® , which is a single-use, pre-filled pump intended to deliver a two-day supply of treprostinil subcutaneously using its PatchPump ® technology. In August 2017, SteadyMed announced receipt of a refuse-to-file letter from the FDA relating to SteadyMed’s NDA, requesting further information on certain device specifications and requiring performance testing as well as additional design verification and validation testing on the final, to-be-marketed Trevyent product. In March 2017, the PTAB issued a Final Written Decision regarding SteadyMed’s IPR, finding that all claims of the ’393 patent are not patentable. In May 2017, we appealed the PTAB’s decision to the U.S. Court of Appeals for the Federal Circuit. The parties have completed briefing the appeal, and oral argument is scheduled for November 7, 2017. The ’393 patent remains valid and enforceable until appeals have been exhausted. We intend to continue vigorously defending the ’393 patent. Department of Justice Subpoena In May 2016, we received a subpoena from the U.S. Department of Justice (DOJ) requesting documents regarding our support of 501(c)(3) organizations that provide financial assistance to patients. Other companies have received similar inquiries. The DOJ is investigating whether that support may violate the Federal Anti-Kickback Statute and the Federal False Claims Act. Although we believe that we would successfully defend any action the DOJ might bring, we are engaged in settlement negotiations with the DOJ as part of our efforts to resolve the matter. However, we cannot provide assurances that our efforts to reach a settlement with the DOJ will be successful or, if they are, what the timing or terms of any such settlement would be. We expect any such settlement would include a settlement payment to the government, and it may also include non-monetary obligations, such as our entering into a corporate integrity agreement (CIA). We may be required to incur significant future costs to comply with the CIA. If we do not reach a settlement with the DOJ, we may incur material losses in connection with the defense or resolution of any subsequent litigation with the government. During the second quarter of 2017, we recorded a $210.0 million accrual relating to this matter. The accrual was recorded in other current liabilities on our consolidated balance sheets and as an operating expense on our consolidated statements of operations. We are unable to estimate the amount of reasonably possible losses in excess of the amount accrued because resolution of this matter through settlement is subject to a range of complex factors. Any actions taken by the DOJ, including settlement, could result in negative publicity or otherwise harm our reputation, reduce demand for our products and/or reduce coverage of our products, including by federal health care programs such as Medicare and Medicaid and state health care programs. If any or all of these events occur, our business, prospects and stock price could be materially and adversely affected. Because matters such as this are inherently unpredictable, the ultimate outcome of this matter, including the amount of any loss, may differ materially from our estimate. |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Investments | |
Schedule of marketable investments classified as available-for-sale | Marketable investments classified as available-for-sale consisted of the following (in millions): As of September 30, 2017 Amortized Gross Fair U.S. government and agency securities $ $ ) $ Total $ $ ) $ Reported under the following captions on the consolidated balance sheet: Cash and cash equivalents $ Current marketable investments Non-current marketable investments Total $ |
Summary of the contractual maturities of available-for-sale marketable investments | The following table summarizes the contractual maturities of available-for-sale marketable investments (in millions): September 30, 2017 Amortized Fair Due in less than one year $ $ Due in one to two years Due in three to five years Total $ $ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Measurements | |
Schedule of assets and liabilities subject to fair value measurements | Assets and liabilities subject to fair value measurements are as follows (in millions): As of September 30, 2017 Level 1 Level 2 Level 3 Balance Assets Money market funds (1) $ $ — $ — $ Time deposits (2) — — U.S. government and agency securities (2) — — Corporate debt securities (2) — — Total assets $ $ $ — $ Liabilities Contingent consideration (3) — — Total liabilities $ — $ — $ $ As of December 31, 2016 Level 1 Level 2 Level 3 Balance Assets Money market funds (1) $ $ — $ — $ U.S. government and agency securities (2) — — Corporate debt securities (2) — — Total assets $ $ $ — $ Liabilities Contingent consideration (3) — — Total liabilities $ — $ — $ $ (1) Included in cash and cash equivalents on the accompanying consolidated balance sheets. (2) Included in cash equivalents and current and non-current marketable investments on the accompanying consolidated balance sheets. The fair value of these securities is principally measured or corroborated by trade data for identical securities in which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded. (3) Included in non-current liabilities on the accompanying consolidated balance sheets. The fair value of contingent consideration has been estimated using probability-weighted discounted cash flow models (DCFs). The DCFs incorporate Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to each acquisition agreement. |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventories | |
Schedule of inventories, net of reserves | Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following, net of reserves (in millions): September 30, December 31, Raw materials $ $ Work-in-progress Finished goods Total inventories $ $ |
Goodwill and Other Intangible22
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Other Intangible Assets | |
Schedule of goodwill and other intangible assets | Goodwill and other intangible assets comprise the following (in millions): As of September 30, 2017 As of December 31, 2016 Gross Accumulated Net Gross Accumulated Net Goodwill $ $ — $ $ $ — $ Other intangible assets: Technology, patents and trade names ) ) In-process research and development — — Customer relationships and non-compete agreements ) — ) Total $ $ ) $ $ $ ) $ |
Share Tracking Awards Plans (Ta
Share Tracking Awards Plans (Tables) - Share tracking award plans (STAP) | 9 Months Ended |
Sep. 30, 2017 | |
Awards granted under the STAP | |
Schedule of assumptions to measure the fair value of outstanding STAP awards | September 30, September 30, Expected volatility % % Risk-free interest rate % % Expected term of awards (in years) Expected dividend yield % % |
Summary of the activity and status of STAP awards | Number of Weighted Weighted Aggregate Outstanding at January 1, 2017 $ Granted — — Exercised ) Forfeited ) Outstanding at September 30, 2017 $ $ Exercisable at September 30, 2017 $ $ Unvested as of September 30, 2017 $ $ |
Schedule of share-based compensation benefit recognized in connection with STAP awards | Share-based compensation (benefit) expense recognized in connection with STAP awards is as follows (in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of product sales $ ) $ $ ) $ ) Research and development ) ) ) Selling, general and administrative ) ) ) Share-based compensation (benefit) expense before taxes $ ) $ $ ) $ ) Related income tax expense (benefit) ) Share-based compensation (benefit) expense, net of taxes $ ) $ $ ) $ ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Common Share | |
Schedule of components of basic and diluted earnings per common share | The components of basic and diluted earnings per common share comprised the following (in millions, except per share amounts): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator: Net income $ $ $ $ Denominator: Weighted average outstanding shares — basic Effect of dilutive securities (1) : Warrants — Stock options, restricted stock units and employee stock purchase plan Weighted average shares — diluted (2) Net income per common share: Basic $ $ $ $ Diluted $ $ $ $ Stock options, convertible notes and warrants excluded from calculation (2) (1) Calculated using the treasury stock method. (2) Certain stock options and warrants have been excluded from the computation of diluted earnings per share because their impact would be anti-dilutive for the three- and nine-month periods ended September 30, 2017 and September 30, 2016. Additionally, certain convertible notes were excluded for the three- and nine-month periods ended September 30, 2016. Under our convertible note hedge agreement, we were entitled to receive shares required to be issued to investors upon conversion of our Convertible Notes. Since related shares used to compute dilutive earnings per share would be anti-dilutive, they have been excluded from the calculation above. |
Stock Options | |
Stock Option Plan | |
Summary of weighted-average assumptions used to measure the fair value of all stock options (including both time-vesting and performance-vesting awards) granted | September 30, September 30, Expected volatility % % Risk-free interest rate % % Expected term of awards (in years) Expected dividend yield % % |
Schedule of the activity and status of stock options | Number of Weighted- Weighted Aggregate Outstanding at January 1, 2017 $ Granted Exercised ) Forfeited/canceled ) Outstanding at September 30, 2017 $ $ Exercisable at September 30, 2017 $ $ Unvested as of September 30, 2017 $ $ |
Summary of stock option exercise data | Stock option exercise data is summarized below (dollars in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Number of options exercised Cash received $ $ $ $ Total intrinsic value of options exercised $ $ $ $ |
Schedule of total share-based compensation expense relating to stock options | Total share-based compensation expense relating to stock options is as follows (in millions): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Cost of product sales $ $ $ $ Research and development Selling, general and administrative Share-based compensation expense before taxes Related income tax benefit ) ) ) ) Share-based compensation expense, net of taxes $ $ $ $ |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Schedule of net product sales, cost of product sales and gross profit for each commercial product | Net product sales, cost of product sales and gross profit for each of our commercial products were as follows (in millions): Three Months Ended September 30, 2017 Remodulin Tyvaso Adcirca Orenitram Unituxin Total Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ 2016 Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ Nine Months Ended September 30, 2017 Remodulin Tyvaso Adcirca Orenitram Unituxin Total Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ 2016 Net product sales $ $ $ $ $ $ Cost of product sales Gross profit $ $ $ $ $ $ |
Litigation (Tables)
Litigation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Litigation | |
Schedule of patent expiration dates | U.S. Patent No. Expiration Date 8,252,839 May 2024 9,050,311 May 2024 7,544,713 July 2024 7,417,070 July 2026 8,497,393 December 2028 8,747,897 October 2029 8,410,169 February 2030 8,349,892 January 2031 |
Basis of Presentation (Details)
Basis of Presentation (Details) - ASU 2016-09 $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Recently Issued Accounting Standards | |
Cumulative effect on retained earnings, Net of tax | $ (5.8) |
Cumulative effect on retained earnings, Tax | $ 3.2 |
Investments - Available-for-sal
Investments - Available-for-sale (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Marketable investments classified as available-for-sale: | ||
Amortized Cost | $ 481 | |
Gross Unrealized Losses | (0.5) | |
Fair Value | 480.5 | $ 0 |
U.S. government and agency securities | ||
Marketable investments classified as available-for-sale: | ||
Amortized Cost | 481 | |
Gross Unrealized Losses | (0.5) | |
Fair Value | $ 480.5 |
Investments - Current and Non-c
Investments - Current and Non-current (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Reported under the following captions on the consolidated balance sheet: | ||
Marketable investments | $ 480.5 | $ 0 |
Cash and cash equivalents | ||
Reported under the following captions on the consolidated balance sheet: | ||
Marketable investments | 28.1 | |
Current marketable investments | ||
Reported under the following captions on the consolidated balance sheet: | ||
Marketable investments | 115.5 | |
Non-current marketable investments | ||
Reported under the following captions on the consolidated balance sheet: | ||
Marketable investments | $ 336.9 |
Investments - Contractual Matur
Investments - Contractual Maturities of Available-for-Sale (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Amortized Cost | ||
Due in less than one year | $ 143.7 | |
Due in one to two years | 252.1 | |
Due in three to five years | 85.2 | |
Total | 481 | |
Fair Value | ||
Due in less than one year | 143.6 | |
Due in one to two years | 251.8 | |
Due in three to five years | 85.1 | |
Marketable investments | $ 480.5 | $ 0 |
Investments - Held-to-Maturity
Investments - Held-to-Maturity and Other (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Marketable investments classified as held-to-maturity: | ||
Marketable Investments classified as held-to-maturity | $ 29.3 | $ 30.1 |
Investments - Investments Held
Investments - Investments Held at Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Investments Held at Cost | |||
Payments made to acquire investments held at cost | $ 55.3 | $ 7.6 | |
Impairment charges | $ 3.1 | 49.6 | |
Privately-held Companies | |||
Investments Held at Cost | |||
Payments made to acquire investments held at cost | 30.2 | 55.3 | |
Privately-held Companies | Other Non-current assets | |||
Investments Held at Cost | |||
Investments held at cost | 178.9 | 178.9 | |
Cost Method Investment One | Privately-held Companies | |||
Investments Held at Cost | |||
Impairment charges | $ 3.1 | $ 49.6 |
Investments - Variable Interest
Investments - Variable Interest Entity (Details) - Variable Interest Entity - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended |
Apr. 30, 2017 | Sep. 30, 2017 | |
Variable Interest Entity | ||
Funding period for additional research and development | 6 years | |
Amount of financial support provided | $ 5.2 | |
Carrying amount of cash | $ 9.6 | |
Carrying amount of in-process research and development intangible assets | 8.8 | |
carrying amount of goodwill | 3.4 | |
Carrying amount of preferred stock | 8.3 | |
Net loss of consolidation entity | $ 1.5 | |
Privately-held Companies | ||
Variable Interest Entity | ||
Investment purchased during the period | $ 7.5 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Recurring fair value measurements - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Level 1 | ||
Assets | ||
Total assets | $ 641.5 | $ 534.4 |
Level 1 | Money market funds | ||
Assets | ||
Total assets | 641.5 | 534.4 |
Level 2 | ||
Assets | ||
Total assets | 509.8 | 30.1 |
Level 2 | Time deposits | ||
Assets | ||
Total assets | 25.2 | |
Level 2 | U.S. government and agency securities | ||
Assets | ||
Total assets | 480.5 | 19.3 |
Level 2 | Corporate debt securities | ||
Assets | ||
Total assets | 4.1 | 10.8 |
Level 3 | ||
Liabilities | ||
Contingent consideration | 10.4 | 10.4 |
Total liabilities | 10.4 | 10.4 |
Balance | ||
Assets | ||
Total assets | 1,151.3 | 564.5 |
Liabilities | ||
Contingent consideration | 10.4 | 10.4 |
Total liabilities | 10.4 | 10.4 |
Balance | Money market funds | ||
Assets | ||
Total assets | 641.5 | 534.4 |
Balance | Time deposits | ||
Assets | ||
Total assets | 25.2 | |
Balance | U.S. government and agency securities | ||
Assets | ||
Total assets | 480.5 | 19.3 |
Balance | Corporate debt securities | ||
Assets | ||
Total assets | $ 4.1 | $ 10.8 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Inventories | ||
Raw materials | $ 27.5 | $ 25.4 |
Work-in-progress | 24.7 | 24.9 |
Finished goods | 62.2 | 49.7 |
Total inventories | $ 114.4 | $ 100 |
Goodwill and Other Intangible36
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Dec. 31, 2016 |
Goodwill and other intangible assets | ||
Goodwill, Gross | $ 13.7 | $ 10.3 |
Goodwill, Net | 13.7 | 10.3 |
Total Goodwill and other intangible assets, Gross | 54.9 | 42.6 |
Other intangible assets, Accumulated Amortization | (9.2) | (8.8) |
Total Goodwill and other intangible assets, Net | 45.7 | 33.8 |
Technology, patents and trade names | ||
Goodwill and other intangible assets | ||
Other intangible assets, Gross | 6.5 | 6.5 |
Other intangible assets, Accumulated Amortization | (4.9) | (4.8) |
Other intangible assets, Net | 1.6 | 1.7 |
In-process research and development | ||
Goodwill and other intangible assets | ||
Other intangible assets, Gross | 30.4 | 21.5 |
Other intangible assets, Net | 30.4 | 21.5 |
Customer relationships and non-compete agreements | ||
Goodwill and other intangible assets | ||
Other intangible assets, Gross | 4.3 | 4.3 |
Other intangible assets, Accumulated Amortization | $ (4.3) | (4) |
Other intangible assets, Net | $ 0.3 |
Share Tracking Awards Plans - G
Share Tracking Awards Plans - General (Details) - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Share tracking award plans (STAP) | |||
Awards granted under the STAP | |||
Grant expiration period from the grant date | 10 years | ||
Share-based awards, vesting period | 4 years | ||
Aggregate STAP liability | $ 146 | $ 268.9 | |
Long term portion of STAP liability | $ 0.9 | $ 74.1 | |
Weighted-average assumptions used to measure the fair value of the outstanding STAP awards: | |||
Expected volatility (as a percent) | 32.80% | 35.50% | |
Risk-free interest rate (as a percent) | 1.40% | 0.90% | |
Expected term of awards (in years) | 1 year 10 months 24 days | 2 years 9 months 18 days | |
Expected dividend yield (as a percent) | 0.00% | 0.00% | |
Closing price of common stock (in dollars per share) | $ 117.19 | $ 118.08 | $ 143.43 |
Share-based awards activity | |||
Outstanding at the beginning of the year (in shares) | 5,113,838 | ||
Exercised (in shares) | (741,859) | ||
Forfeited (in shares) | (116,418) | ||
Outstanding at the end of the year (in shares) | 4,255,561 | ||
Exercisable at the end of the year (in shares) | 2,553,425 | ||
Unvested at the end of the year (in shares) | 1,702,136 | ||
Share awards, Weighted Average Exercise Price | |||
Outstanding at the beginning of the year (in dollars per share) | $ 91.51 | ||
Exercised (in dollars per share) | 70.70 | ||
Forfeited (in dollars per share) | 110.40 | ||
Outstanding at the end of the year (in dollars per share) | 94.62 | ||
Exercisable at the end of the year (in dollars per share) | 96.99 | ||
Unvested at the end of the year (in dollars per share) | $ 91.06 | ||
Share awards, Weighted Average Remaining Contractual Term (in Years) | |||
Outstanding at the end of the year | 5 years 9 months 18 days | ||
Exercisable at the end of the year | 5 years 8 months 12 days | ||
Unvested at the end of the year | 6 years 1 month 6 days | ||
Share awards, Aggregate Intrinsic Value | |||
Outstanding at the end of the year (in dollars) | $ 153.1 | ||
Exercisable at the end of the year (in dollars) | 86.6 | ||
Unvested at the end of the year (in dollars) | $ 66.5 | ||
Tranche one | Share tracking award plans (STAP) | |||
Awards granted under the STAP | |||
Share-based awards, vesting period | 1 year | ||
Decrease in non-current liabilities | $ 60.7 | ||
ASU 2016-09 | |||
Awards granted under the STAP | |||
Cumulative effect on retained earnings, Net of tax | (5.8) | ||
ASU 2016-09 | Share tracking award plans (STAP) | |||
Awards granted under the STAP | |||
Cumulative effect on aggregate STAP liability | 8.4 | ||
Cumulative effect on retained earnings, Net of tax | $ (5.4) |
Share Tracking Awards Plans - E
Share Tracking Awards Plans - Expense Recognized (Details) - Share tracking award plans (STAP) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share based compensation benefit recognized in connection with the STAP | ||||
Share-based compensation benefit before taxes | $ (38) | $ 45.8 | $ (77.5) | $ (116.5) |
Related income tax expense | 13.9 | (17.1) | 28.4 | 42.6 |
Share-based compensation benefit, net of taxes | (24.1) | 28.7 | (49.1) | (73.9) |
Cash payments on awards exercised during the period | 54.1 | 52.7 | ||
Cost of product sales | ||||
Share based compensation benefit recognized in connection with the STAP | ||||
Share-based compensation benefit before taxes | (2.1) | 3.5 | (4.7) | (8.7) |
Research and development | ||||
Share based compensation benefit recognized in connection with the STAP | ||||
Share-based compensation benefit before taxes | (8.2) | 8.1 | (16.9) | (31.6) |
Selling, general and administrative | ||||
Share based compensation benefit recognized in connection with the STAP | ||||
Share-based compensation benefit before taxes | $ (27.7) | $ 34.2 | $ (55.9) | $ (76.2) |
Debt (Details)
Debt (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 4 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Mar. 31, 2017 | Mar. 31, 2017 | Sep. 30, 2017 | Jun. 01, 2017 | Oct. 31, 2011 | |
Credit Agreement 2016 | ||||||
Debt | ||||||
Maximum borrowing capacity | $ 1,000 | $ 1,000 | ||||
Period of extension in maturity | 1 year | |||||
Interest expense | $ 2.1 | $ 3.7 | ||||
Debt aggregate principal value | $ 250 | |||||
Convertible Notes Due 2016 | ||||||
Debt | ||||||
Debt aggregate principal value | $ 250 | |||||
Stated percentage rate | 1.00% | |||||
Sale of warrant | ||||||
Share warrant, number of shares | 5.2 | |||||
Share warrant, strike price (in dollars per share) | $ 67.56 | |||||
Shares issued upon expiration of warrants (shares) | 1.7 | 2.8 |
Stockholders' Equity - Earnings
Stockholders' Equity - Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Numerator: | ||||
Net income | $ 276.3 | $ 161.8 | $ 398.9 | $ 603.4 |
Denominator: | ||||
Weighted average outstanding shares - basic (in shares) | 43.4 | 43.2 | 44.3 | 44.3 |
Effect of dilutive securities: | ||||
Warrants (in shares) | 2.3 | 0.1 | 2.3 | |
Stock options, restricted stock units and employee stock purchase plan (in shares) | 0.7 | 0.7 | 0.8 | 0.7 |
Weighted average shares - diluted (in shares) | 44.1 | 46.2 | 45.2 | 47.3 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 6.37 | $ 3.75 | $ 9 | $ 13.62 |
Diluted (in dollars per share) | $ 6.27 | $ 3.50 | $ 8.83 | $ 12.76 |
Stock options, convertible notes and warrants excluded from calculation (in shares) | 3.7 | 5.3 | 3.1 | 5.3 |
Stockholders' Equity - Equity I
Stockholders' Equity - Equity Incentive Plans (Details) | 9 Months Ended | |
Sep. 30, 2017itemshares | Sep. 30, 2016shares | |
Equity Incentive Plans | ||
Number of equity incentive plans | item | 2 | |
Amended and Restated Equity Incentive Plan (The 1999 Plan) | ||
Options disclosures | ||
Granted (in shares) | 0 | |
2015 Plan | ||
Equity Incentive Plans | ||
Maximum number of shares authorized to be issued (in shares) | 6,150,000 | |
Options disclosures | ||
Granted (in shares) | 2,000,000 | 1,600,000 |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Options (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
2015 Plan | |||
Stock options with performance condition | |||
Options granted with performance condition (in shares) | 2 | 1.6 | |
ASU 2016-09 | |||
Recently Issued Accounting Standards | |||
Cumulative effect on retained earnings, Net of tax | $ (5.8) | ||
Cumulative effect on retained earnings, Tax | 3.2 | ||
ASU 2016-09 | 2015 Plan | |||
Recently Issued Accounting Standards | |||
Cumulative effect on retained earnings, Net of tax | $ (0.4) | ||
Performance Shares | 2015 Plan | |||
Stock options with performance condition | |||
Options granted with performance condition (in shares) | 0.9 | ||
Aggregate grant date fair value | $ 53.9 | ||
Allocated Share-based Compensation Expense | $ 5.7 | $ 11.2 | |
Performance Shares | 2015 Plan | Minimum | |||
Stock options with performance condition | |||
Vesting period (in years) | 1 year | ||
Performance Shares | 2015 Plan | Maximum | |||
Stock options with performance condition | |||
Vesting period (in years) | 3 years |
Stockholders' Equity - Assumpti
Stockholders' Equity - Assumptions For Stock Options (Details) - Stock Options | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Method and assumptions on valuation of stock options | ||
Expected volatility (as a percent) | 35.70% | 34.80% |
Risk-free interest rate (as a percent) | 2.20% | 1.60% |
Expected term of awards (in years) | 6 years 1 month 6 days | 5 years 9 months 18 days |
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Stockholders' Equity - Stock 44
Stockholders' Equity - Stock Options Activity and Status (Details) - Stock Options - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Number of Options | ||||
Outstanding at the beginning of the period (in shares) | 4,459,291 | |||
Granted (in shares) | 1,958,843 | |||
Exercised (in shares) | (40,565) | (42,443) | (428,541) | (196,984) |
Forfeited/canceled (in shares) | (64,586) | |||
Outstanding at the end of the period (in shares) | 5,925,007 | 5,925,007 | ||
Exercisable at the end of the period (in shares) | 3,114,975 | 3,114,975 | ||
Unvested at the end of the period (in shares) | 2,810,032 | 2,810,032 | ||
Weighted-Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 104.97 | |||
Granted (in dollars per share) | 145.72 | |||
Exercised (in dollars per share) | 89.17 | |||
Forfeited/canceled (in dollars per share) | 132.86 | |||
Outstanding at the end of the period (in dollars per share) | $ 119.28 | 119.28 | ||
Exercisable at the end of period (in dollars per share) | 102.70 | 102.70 | ||
Unvested at the end of period (in dollars per share) | $ 137.66 | $ 137.66 | ||
Weighted Average Remaining Contractual Term (Years) | ||||
Outstanding at the end of the period | 7 years 3 months 18 days | |||
Exercisable at the end of the period | 5 years 8 months 12 days | |||
Unvested at the end of the period | 9 years 1 month 6 days | |||
Aggregate Intrinsic Value | ||||
Outstanding at the end of the period (in dollars) | $ 64.4 | $ 64.4 | ||
Exercisable at the end of the period (in dollars) | 63.8 | 63.8 | ||
Unvested at the end of period (in dollars) | $ 0.6 | $ 0.6 | ||
Weighted average fair value of a stock option (in dollars per share) | $ 56.07 | $ 42.55 | ||
Aggregate grant date fair value | $ 109.8 | $ 69.2 | ||
Total fair value of employee stock options that vested | $ 13.1 | $ 19.9 |
Stockholders' Equity - Stock 45
Stockholders' Equity - Stock Options Exercise Data (Details) - Stock Options - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Summary of stock option exercise data | ||||
Number of options exercised (in shares) | 40,565 | 42,443 | 428,541 | 196,984 |
Cash received | $ 1.6 | $ 1.2 | $ 38.2 | $ 6.2 |
Total intrinsic value of options exercised | $ 3.5 | $ 3.9 | $ 27 | $ 17.3 |
Stockholders' Equity - Share-ba
Stockholders' Equity - Share-based Compensation Expense (Details) - Stock Options - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share-based compensation expense | ||||
Share-based compensation expense before taxes | $ 13.1 | $ 3.3 | $ 29.9 | $ 21.7 |
Related income tax benefit | (4.8) | (1.1) | (11) | (7.9) |
Share-based compensation benefit, net of taxes | 8.3 | 2.2 | 18.9 | 13.8 |
Cost of product sales | ||||
Share-based compensation expense | ||||
Share-based compensation expense before taxes | 0.4 | 0.1 | 0.9 | 0.3 |
Research and development | ||||
Share-based compensation expense | ||||
Share-based compensation expense before taxes | 1 | 0.5 | 2.6 | 1 |
Selling, general and administrative | ||||
Share-based compensation expense | ||||
Share-based compensation expense before taxes | $ 11.7 | $ 2.7 | $ 26.4 | $ 20.4 |
Stockholders' Equity - Unrecogn
Stockholders' Equity - Unrecognized Compensation Cost (Details) - Stock Options $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Equity Incentive Plans | |
Unrecognized compensation cost | $ 114.5 |
Weighted average remaining vesting period (in years) | 2 years 7 months 6 days |
Stockholders' Equity - Restrict
Stockholders' Equity - Restricted Stock Units (Details) - Restricted stock units $ / shares in Units, $ in Millions | 9 Months Ended | |
Sep. 30, 2017USD ($)item$ / sharesshares | Sep. 30, 2016USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares of common stock entitled for each unit upon vesting | item | 1 | |
Granted (in shares) | shares | 17,820 | |
Awards granted during the period, weighted average grant date fair value (in dollars per share) | $ / shares | $ 132.30 | |
Aggregate grant date fair value | $ 2.4 | |
Unrecognized compensation cost | $ 1.7 | |
Weighted average remaining vesting period (in years) | 8 months 12 days | |
Selling, general and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense before taxes | $ 1.6 | $ 0.6 |
Stockholders' Equity - Share Re
Stockholders' Equity - Share Repurchases (Details) - USD ($) shares in Millions, $ in Millions | Sep. 08, 2017 | Jun. 30, 2017 | May 31, 2017 | Apr. 30, 2017 |
Share Repurchases | ||||
Authorized aggregate repurchases of common stock | $ 250 | |||
May 2017 Accelerated Share Repurchase Agreement | ||||
Share Repurchases | ||||
Payment for cost of accelerated share repurchase agreement entered | $ 250 | |||
Repurchased shares of common stock | 1.7 | |||
Repurchased additional shares of common stock | 0.3 |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2017 | |
Effective income tax rate | 37.00% | 32.00% | |||
Estimated loss contingency accrual expense | $ 210 | ||||
Impairment charges | $ 3.1 | $ 49.6 | |||
Number of investments held at cost for which impairment charge recorded | item | 2 | ||||
Deferred income tax asset recorded on non-deductible impairment expenses | 18.3 | $ 18.3 | |||
Effective income tax rate impacted for valuation allowance | 3.00% | ||||
Uncertain tax positions | 0.5 | $ 0.5 | $ 0.5 | ||
Positions of uncertain tax, if realized, would impact the effective tax rate | 0.3 | 0.3 | 0.3 | ||
Accrued interest expense related to uncertain tax positions | 0 | $ 0 | $ 0 | ||
Forecast | |||||
Effective income tax rate impacted for valuation allowance | 2.00% | ||||
U.S. Department of Justice | |||||
Estimated loss contingency accrual expense | $ 210 | ||||
Tax benefit related to accrual | $ 57 | $ 0 |
Income Taxes - Effect of adopti
Income Taxes - Effect of adoption of ASU 2016-09 (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Effect of adoption of ASU 2016-09 | ||||
Income tax expense (benefit) | $ 44.4 | $ 77.3 | $ 229.6 | $ 285.3 |
ASU 2016-09 | ||||
Income Tax Effect of adoption of ASU 2016-09 | ||||
Cumulative effect on retained earnings, Tax | (3.2) | |||
Income tax expense (benefit) | $ (4.4) |
Segment Information - General (
Segment Information - General (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | |
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | $ 445.5 | $ 408.2 | $ 1,260.6 | $ 1,189.8 |
Cost of product sales | 19.5 | 23.6 | 52.7 | 44.3 |
Gross profit | 426 | 384.6 | $ 1,207.9 | 1,145.5 |
Segment disclosures | ||||
Number of operating segments | segment | 1 | |||
Remodulin | ||||
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | 187.3 | 152.4 | $ 490.8 | 451.1 |
Cost of product sales | 4 | 3.7 | 9.9 | 4.3 |
Gross profit | 183.3 | 148.7 | 480.9 | 446.8 |
Tyvaso | ||||
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | 88.9 | 101.8 | 280.5 | 311 |
Cost of product sales | 2.2 | 5.8 | 7.9 | 12.9 |
Gross profit | 86.7 | 96 | 272.6 | 298.1 |
Adcirca | ||||
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | 99.8 | 96 | 300.4 | 259.5 |
Cost of product sales | 5.6 | 5.5 | 16.9 | 15 |
Gross profit | 94.2 | 90.5 | 283.5 | 244.5 |
Orenitram | ||||
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | 52.5 | 40.7 | 137.8 | 118.9 |
Cost of product sales | 3.9 | 5.2 | 10.7 | 7.9 |
Gross profit | 48.6 | 35.5 | 127.1 | 111 |
Unituxin | ||||
Net product sales, cost of product sales and gross profit by product | ||||
Net product sales | 17 | 17.3 | 51.1 | 49.3 |
Cost of product sales | 3.8 | 3.4 | 7.3 | 4.2 |
Gross profit | $ 13.2 | $ 13.9 | $ 43.8 | $ 45.1 |
Litigation (Details)
Litigation (Details) $ in Millions | Oct. 13, 2017 | Jun. 30, 2017USD ($) | Sep. 30, 2017USD ($)patent |
Litigation | |||
Estimated loss contingency accrual expense | $ | $ 210 | ||
Other current liabilities | |||
Litigation | |||
Loss contingency accrual, current | $ | $ 210 | ||
U.S. Department of Justice | |||
Litigation | |||
Estimated loss contingency accrual expense | $ | 210 | ||
U.S. Department of Justice | Operating expenses | |||
Litigation | |||
Estimated loss contingency accrual expense | $ | $ 210 | ||
Pending Litigation | Watson Laboratories Inc. | |||
Litigation | |||
Maximum period for which the FDA is automatically precluded from approving ANDA | 30 months | ||
Number of additional patents being addressed in litigation | patent | 2 | ||
Time period PTAB has to decided whether to institute IPR proceedings | 3 months | ||
Time period after PTAB petitions resolution that litigation parties asked to stay case | 14 days | ||
Pending Litigation | Actavis Laboratories FL, Inc. | |||
Litigation | |||
Maximum period for which the FDA is automatically precluded from approving ANDA | 30 months | ||
Number of additional patents being addressed in litigation | patent | 1 | ||
Number of patents on which district court decision is adverse | patent | 9 | ||
Number of patents related to alleged infringement in second amended complaint by reporting entity | patent | 2 | ||
Pending Litigation | SteadyMed Ltd. | |||
Litigation | |||
Number of days for supply of treprostinil under FDA approval | 2 days |