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Securities and Exchange Commission

Form 10-K

Commission File Number 0-26301

United Therapeutics Corporation

Registrant’s telephone number, including area code:

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ         No o

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of this Form 10-K or any amendment to this Form 10-K.    o

    Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes þ         No o

    The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2003 as reported by the Nasdaq National Market was approximately $431.5 million.⁽¹⁾

    The number of shares outstanding of the registrant’s Common Stock, par value $0.01 per share, as of March 1, 2004 was 21,332,444 shares.

DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the registrant’s definitive proxy statement for the registrant’s 2004 annual shareholders meeting are incorporated by reference in Part III of this Form 10-K.

⁽¹⁾ Excludes 1,226,424 shares of common stock held by directors and officers, and any stockholders whose ownership exceeds ten percent of the shares outstanding at June 30, 2003. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, directly or indirectly, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant.

TABLE OF CONTENTS

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PART I

      United Therapeutics is a biotechnology company focused on the development and commercialization of unique therapeutics to treat chronic and life-threatening diseases. United Therapeutics is active in three therapeutic areas — cardiovascular medicine, infectious disease and oncology — with five therapeutic platforms:

	•	Prostacyclin Analogs, which are stable synthetic forms of prostacyclin, an important molecule produced by the body that has powerful effects on blood vessel health and function. United Therapeutics’ drug Remodulin® has been approved by the Food and Drug Administration (FDA) in the United States for the treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV symptoms to diminish symptoms associated with exercise, and in Canada and Israel for similar uses;
	•	Immunotherapeutic Monoclonal Antibodies, which are antibodies that activate patients’ immune systems to treat cancer, including OvaRex® which is being developed for the treatment of metastatic ovarian cancer;
	•	Glycobiology Antiviral Agents, which are a novel class of small molecules which may be effective as an oral therapy for hepatitis C and other infections;
	•	Telemedicine, which involves portable digital devices that enable physicians to remotely monitor patients’ bodily measurements such as heart function, including the CardioPAL® cardiac event recorder; and
	•	Arginine Formulations, including the HeartBar® and other products, which deliver the amino acid arginine that is necessary for maintaining vascular function.

      Most of United Therapeutics’ resources are focused on its prostacyclin analogs for the treatment of cardiovascular disease and immunotherapeutic monoclonal antibodies for the treatment of cancer. United Therapeutics’ other principal focus area is the development of glycobiology antiviral agents for the treatment of hepatitis and other diseases. United Therapeutics also devotes resources to the commercialization and further development of arginine supplementation therapy, especially in cardiovascular health, and of telecardiology, principally for the detection of cardiac arrhythmias.

      United Therapeutics was incorporated in June 1996 in Delaware under the name Lung Rx, Inc. The company changed its name to United Therapeutics Corporation in December 1997. United Therapeutics’ corporate headquarters are located at 1110 Spring Street, Silver Spring, Maryland 20910.

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United Therapeutics’ Products

      United Therapeutics’ product portfolio includes the following:

*	Including Germany, but excluding the rest of Europe and the Middle East.

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	Remodulin

      In December 1996 and January 1997, United Therapeutics obtained worldwide rights for all indications to Remodulin (also known as UT-15 and formerly known as Uniprost), a prostacyclin analog, from Glaxo Wellcome, Inc. and Pharmacia & Upjohn Company (see Patent and Proprietary Rights below). In October 1999, United Therapeutics acquired all the outstanding stock of SynQuest, Inc., the manufacturer of treprostinil, the bulk active ingredient in Remodulin. Remodulin, United Therapeutics’ main product, was approved by the FDA in May 2002 in the United States and in October 2002 in Canada and Israel.

      United Therapeutics has focused primarily on developing Remodulin as its lead product for treating pulmonary arterial hypertension. Pulmonary arterial hypertension is a vascular disease that affects the blood vessels between the heart and lungs known as the pulmonary blood vessels. Pulmonary arterial hypertension is characterized by the degradation of the blood vessel wall lining, the aggregation of platelets and the disruption of smooth muscle cell function. These conditions cause blockages and affect the ability of the blood vessels to dilate and then constrict as blood flows to the lungs. The resulting elevated pulmonary blood pressure causes increasing strain on the right side of the heart as it tries to pump blood to the lungs. It is estimated that there are between 50,000 and 100,000 individuals with pulmonary arterial hypertension worldwide.

      Pulmonary arterial hypertension is associated with reduced production of the natural hormone prostacyclin in the pulmonary blood vessels. Prostacyclin appears to dilate blood vessels where necessary, prevent platelet aggregation, and prevent proliferation of smooth muscle cells surrounding the vessels. The first FDA-approved prostacyclin for pulmonary arterial hypertension was Flolan®, a synthetic form of prostacyclin delivered continuously by an external pump through a surgically implanted intravenous catheter. Flolan was approved for use in certain subsets of late-stage pulmonary arterial hypertension.

      United Therapeutics believes Remodulin provides patients with a convenient and less invasive alternative to Flolan. In contrast to Flolan, Remodulin is stable at room temperature and is significantly longer lived in the human body. These attributes allow for safer and more convenient delivery of Remodulin to patients. Unlike Flolan, Remodulin is delivered by subcutaneous infusion with a pager-sized microinfusion device made by Medtronic MiniMed (see The Medtronic MiniMed Strategic Alliance below). Subcutaneous delivery of Remodulin also eliminates the risk of sepsis infection and related hospitalization associated with the Flolan catheter. Remodulin’s extended life in the body also greatly reduces the risk of an abrupt recurrence of pulmonary hypertension and death if treatment is interrupted. The stability of Remodulin also allows it to be prepackaged, thus eliminating the need to reconstitute the drug one or more times daily under completely sterile conditions, as is required with Flolan. Lastly, Remodulin does not require the use of cooling packs or refrigeration as is required with Flolan to keep it stable. Remodulin causes infusion site pain and infusion site reaction in most patients in varying degrees.

      In March 2000, United Therapeutics completed an international, randomized, placebo-controlled, double-blind study of Remodulin involving a total of 470 patients with pulmonary arterial hypertension. Half of the patients received Remodulin subcutaneously for 12 weeks, while the other half received a placebo. The study data show that patients who received Remodulin had significant improvement in exercise capacity, pulmonary blood pressure and in the signs and symptoms of the disease. Based on the favorable results of this study, United Therapeutics filed a New Drug Application (NDA) with the FDA in late 2000.

      On May 21, 2002, the FDA approved Remodulin (treprostinil sodium) Injection for the treatment of pulmonary arterial hypertension in patients with NYHA class II-IV symptoms to diminish symptoms associated with exercise. Remodulin may be prescribed for all disease subsets of pulmonary arterial hypertension and is the only pulmonary arterial hypertension treatment approved for patients with NYHA class II (early-stage) symptoms.

      United Therapeutics agreed with the FDA that it would perform a post-marketing Phase IV clinical study to further assess the clinical benefits of Remodulin. The study was originally to have been completed by May 2004 and involve 100 patients. In mid-2003, the FDA agreed to extend the due date of the final study report to December 2005 and reduce the number of patients to 39, with the possibility of concluding the trial after 21 patients have completed the study. As of February 2004, approximately 11 patients have been enrolled in the Phase IV study.

      On October 7, 2002, the Canadian Therapeutics Products Directorate approved Remodulin for long term subcutaneous treatment of pulmonary arterial hypertension in NYHA class III and IV patients who do not respond adequately to conventional therapy. On October 31, 2002, the Israeli Ministry of Health, Drug Registration Department, approved Remodulin for the treatment of primary pulmonary arterial hypertension, pulmonary arterial hypertension associated with connective tissue disorders and pulmonary arterial hypertension associated with congenital systemic to pulmonary shunts. In December 2003, Switzerland and Australia announced that they would approve Remodulin pending final labeling and a commitment to perform a drug interaction study in Switzerland. A marketing authorization application for the approval of Remodulin in France is under review. Additional European filings will be made following approval in France.

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      In July 2003, the FDA accepted United Therapeutics’ Investigational New Drug Application (IND) for the development of Remodulin by intravenous delivery for the treatment of pulmonary arterial hypertension. A bioequivalence study in human volunteers was performed in late 2003, which established that intravenous and subcutaneous Remodulin are bioequivalent (meaning that both routes of infusion result in comparable levels of Remodulin in the blood). In addition, animal toxicology studies were completed and indicated comparable safety of chronic intravenous infusion as compared to chronic subcutaneous infusion.

      On January 30, 2004, a supplemental New Drug Application (sNDA) was filed with the FDA to request approval for intravenous use of Remodulin in pulmonary arterial hypertension. The sNDA is currently under review.

      While intravenous Remodulin would not possess all the safety and convenience benefits as subcutaneously delivered Remodulin, it would eliminate the infusion site pain and reaction currently experienced by most patients using Remodulin subcutaneously. In addition, it could serve as an alternative to intravenous Flolan, since Flolan must be continuously refrigerated, including during infusion, whereas Remodulin does not require any refrigeration. Furthermore, the active ingredient in Flolan is highly unstable and only remains active in the body for approximately two minutes, whereas the active ingredient in Remodulin remains active for a few hours. This may reduce the risk of rebound hypertension, which is a severe recurrence of the disease in the case of inadvertent therapy interruption.

      United Therapeutics is also developing Remodulin for late-stage peripheral vascular disease known as critical limb ischemia. Peripheral vascular disease is a vascular disease that affects the blood vessels in the legs. While the precise cause of peripheral vascular disease is unknown, diabetes, obesity, smoking and lack of exercise are associated with the disease. Peripheral vascular disease appears to be similar to pulmonary hypertension in that there is a reduction in natural prostacyclin in the affected blood vessels.

      In the United States, it is estimated that 750,000 people suffer from critical limb ischemia. The disease is characterized by extreme pain, non-healing ulcers in the legs, reduced exercise capacity and severely reduced blood flow in the limbs. There are currently no drugs approved to treat critical limb ischemia. Physicians, therefore, perform surgical interventions (such as balloon angioplasty, stents and by-passes) to restore or improve blood flow in the limbs. These procedures can provide relief to patients, but do not address the underlying causes of peripheral vascular disease. Due to the lack of adequate treatments, approximately 200,000 amputations of limbs are performed each year on patients with critical limb ischemia.

      In September 1998, United Therapeutics completed a Phase II study which assessed the safety and blood flow effects of Remodulin administered intravenously to patients with critical limb ischemia. The study demonstrated that Remodulin can be administered safely to patients with critical limb ischemia and that Remodulin substantially increased blood flow in the affected areas of the legs. United Therapeutics has commenced a pre-pivotal clinical study of Remodulin for critical limb ischemia. There are currently 12 patients enrolled in this 30 patient placebo-controlled trial.

      United Therapeutics is currently in the early stage of development of a longer-acting prostacyclin analog, known as UT-15 Sustained Release. UT-15 Sustained Release will be developed as an oral therapy for vascular diseases, including pulmonary arterial hypertension and peripheral vascular disease. A longer-acting prostacyclin analog could enable patients to take fewer doses per day. A Phase I study in healthy human volunteers to assess bioavailability was conducted during 2003. United Therapeutics is currently testing tablet and capsule dosage forms in healthy volunteers to determine which formulation is most suitable for Phase II studies.

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      United Therapeutics has tested the anti-cancer capabilities of Remodulin in laboratory experiments. These in vitro studies showed that Remodulin has an anti-metastatic effect at the same dose given to pulmonary hypertension patients. In addition, there are many published reports of the anti-cancer effects of various analogs of the prostacyclin molecule. Much of the excitement regarding prostacyclin as an anti-cancer molecule has to do with prostacyclin’s ability to block an endothelial cell receptor (called the PPAR receptor) which is believed to be needed for tumor growth. Given the potency of Remodulin, and its relative ease of use, United Therapeutics believes there may be anti-cancer potential in this lead product and further development may be initiated in the future.

      United Therapeutics’ marketing strategy for Remodulin relies upon United Therapeutics staff to educate the prescribing community. During 2002, United Therapeutics formed an internal marketing team to handle these educational efforts. The team consisted of seven people as of December 2003 and is expected to continue growing in 2004. Additionally, United Therapeutics relies on chronic care specialty pharmacy distributors to handle doctor and patient requests for Remodulin on a non-exclusive basis in the United States. See Domestic Strategic Alliances below. These specialty distributors are experienced in the sale, distribution and reimbursement from insurance companies and other payers of chronic therapies. Outside of the United States, United Therapeutics has entered into six exclusive distributor agreements covering Canada, most of Europe, Australia, South America and Israel. United Therapeutics sells Remodulin to its distributors in the United States at a discount from an average wholesale price suggested by United Therapeutics, and to its international distributors at a transfer price set by United Therapeutics. Approximately $45.1 million, $21.2 million and $493,000 of revenues were earned from the sales of Remodulin in 2003, 2002 and 2001, respectively.

      In December 2000, United Therapeutics expanded its cardiovascular focus when it acquired the assets and certain liabilities of Cooke Pharma, Inc., the exclusive manufacturer of the HeartBar line of arginine-enriched products that is now operating as Unither Pharma, Inc., a wholly owned subsidiary of United Therapeutics. Arginine is required by the body to produce nitric oxide, which is critical for maintaining vascular function and Unither Pharma owns the exclusive patent rights to make these claims. Although arginine is broadly sold as a nutritional supplement in pill form, there are no existing arginine products, other than HeartBar, that can deliver 6 grams of arginine in a single dose. Individual pills generally contain only 500 milligrams of arginine or one-twelfth the amount in one HeartBar. HeartBar products are sold in several flavors of protein rich bars and drink mixes.

      Presently, the HeartBar and related line of products is marketed directly to consumers via independent distributors and the Internet. Approximately $2.3 million, $1.4 million and $542,000 of revenues were earned from the sales of HeartBar and related products in 2003, 2002 and 2001, respectively.

      United Therapeutics provides telemedicine services to detect cardiac arrhythmias and ischemic heart disease through its wholly owned subsidiary, Medicomp, Inc. Cardiac arrhythmias and ischemic heart disease afflict an estimated 20 million Americans, and possibly ten times that number worldwide. If left undetected and untreated, these conditions can result in heart attacks and death. Medicomp provides cardiac Holter, event monitoring and analysis and pacemaker monitoring remotely via telephone lines and the Internet for hospitals, clinicians and other providers. Medicomp’s services are delivered through its proprietary Decipher miniaturized digital holter recorder/analyzer and CardioPAL event monitor. In addition, the CardioPAL AI, a next-generation event recorder, is currently in final testing.

      Holter, event and pacemaker services and systems are marketed to physicians, hospitals, and managed care providers directly by Medicomp’s internal sales force. Revenues of approximately $4.2 million,

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      In April 2002, Unither Pharmaceuticals, Inc., a wholly owned subsidiary of United Therapeutics, entered into an agreement with AltaRex Corp. (now AltaRex Medical Corp.) to exclusively license certain rights to a platform of five immunotherapeutic monoclonal antibodies. These products were being developed by AltaRex to treat ovarian, prostate, lung, breast, multiple myeloma, gastrointestinal and other forms of cancer. The lead product, OvaRex, had completed Phase II studies in metastatic ovarian cancer.

      Ovarian cancer is the deadliest of women’s reproductive cancers and is the fifth leading cause of cancer death among women in the United States. Over 25,000 cases of ovarian cancer are diagnosed in the United States every year, with over 16,000 women dying of the disease.

      In January 2003, United Therapeutics initiated two identical Phase III pivotal clinical trials of OvaRex in patients with stage III/IV advanced ovarian cancer, called IMPACT I and II. These studies are being conducted at approximately 60 centers throughout the United States and are expected to be fully enrolled in approximately two to three years. Patients enrolled in these studies have successfully completed front-line therapy, consisting of surgery and chemotherapy. The primary endpoint for these trials is to assess the time to disease relapse. Patients will also be followed for survival.

      In March 2000, Unither Pharmaceuticals, Inc. entered into a license agreement with Synergy Pharmaceuticals, Inc. to obtain from Synergy the exclusive worldwide rights to certain patents relating to novel antiviral compounds. These glycobiology antiviral agents are small molecules which may be effective as an oral therapy for the treatment of hepatitis C and B infections, as well as dengue, Japanese encephalitis virus and other infectious diseases. Currently, many of these agents are undergoing laboratory testing and new agents are being synthesized.

      The most advanced agent identified to date is UT-231B. An Investigational New Drug Application (IND) was submitted for UT-231B in 2002 and accepted by the FDA. UT-231B completed acute and chronic Phase I dosing studies in early 2003. A Phase II proof-of-concept study for UT-231B in patients infected with hepatitis C who have failed conventional therapies is currently being enrolled with an anticipated completion date of late 2004.

      In June 2000, United Therapeutics obtained from Toray Industries, Inc. the exclusive right to develop and market the oral prostacyclin beraprost in the sustained release formulation in the United States and Canada for the treatment of all vascular and cardiovascular indications.

      Beraprost is an oral form of prostacyclin that is chemically stable. Like natural prostacyclin and Remodulin, beraprost dilates blood vessels, prevents platelet aggregation and prevents proliferation of smooth muscle cells surrounding blood vessels. Intermittent oral doses of immediate release beraprost did not prove effective in Phase III studies conducted by United Therapeutics during 2000 and 2001. However, United Therapeutics believes that sustained release oral doses of beraprost may be an important treatment for early-stage peripheral vascular disease and for early-stage pulmonary hypertension. Beraprost is presently in Phase I clinical testing being conducted by Toray Industries in Japan.

      Toray is required to complete testing of sustained release beraprost through Phase I to adequately document its performance in humans. If Toray is able to do so, United Therapeutics would be obligated to grant Toray an option to purchase 500,000 shares of United Therapeutics’ common stock at the then current fair value of that stock. The development of sustained release beraprost, however, has been significantly delayed by Toray and United Therapeutics may cancel this agreement prior to granting any options.

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      In December 2000, Lung Rx, Inc., a wholly owned subsidiary of United Therapeutics, formed a new company in Canada, Northern Therapeutics, Inc., with the inventor of a new form of autologous (non-viral vector) gene therapy for the treatment of pulmonary arterial hypertension and other conditions. In Canada, Northern Therapeutics is developing the gene therapy and also is distributing certain United Therapeutics’ products, including Remodulin. United Therapeutics received approximately 59 percent of the initial outstanding common stock of Northern Therapeutics in exchange for $5.0 million, and currently owns approximately 68 percent of Northern Therapeutics.

The Medtronic MiniMed Strategic Alliance

      Medtronic MiniMed partnered with United Therapeutics for the use of its pager-sized continuous microinfusion pump for delivery of Remodulin subcutaneously. United Therapeutics entered into an agreement with MiniMed, Inc. (now Medtronic MiniMed) in September 1997, which was implemented in a detailed set of guidelines to collaborate in the design, development and implementation of therapies to treat pulmonary hypertension utilizing MiniMed products and Remodulin. The guidelines require United Therapeutics to purchase its Remodulin infusion pumps exclusively from Medtronic MiniMed at a discount to MiniMed list prices unless MiniMed’s infusion pumps fail to receive certain government approvals or cannot be appropriately used. The term of the agreement commenced on September 3, 1997 and continues for seven years after the May 2002 FDA approval of Remodulin. The agreement will be automatically extended for additional 12-month periods unless otherwise terminated. The agreement is subject to early termination in the event of a material breach or bankruptcy of either party. In the event that there are any discoveries or improvements arising out of work performed under the agreement, the parties will have joint ownership of those discoveries or improvements. United Therapeutics and MiniMed have established a Management Committee comprised of two representatives from each company to oversee implementation of the agreement. United Therapeutics acquires Medtronic MiniMed products and resells these products to its distributors at their acquisition cost. Approximately $1.7 million, $3.7 million and $1.1 million of revenues were earned from the resales of MiniMed pumps and supplies in 2003, 2002 and 2001, respectively.

Domestic Strategic Alliances

      To provide the marketing, promotion and distribution of Remodulin in the United States, United Therapeutics entered into non-exclusive distribution agreements with Priority Healthcare Corporation, Accredo Therapeutics, Inc. (formerly known as Gentiva Health Services, Inc.) and Caremark, Inc. in February 2000, March 2000 and May 2003, respectively. Under these distribution agreements, United Therapeutics sells Remodulin at a discount, from an average wholesale price recommended by United Therapeutics and sells Medtronic Minimed infusion pumps at a list price. The distributors are responsible for assisting patients with obtaining reimbursement for the cost of the therapy and providing other support services. The terms of the agreements commenced on signing and continue for two years following the May 2002 FDA approval of Remodulin for Priority (which has been extended through September 30, 2005) and three years following the May 2002 launch of Remodulin for Accredo. The terms of the Caremark agreement commenced on signing and continue for two years from signing. These agreements will be automatically renewed thereafter for additional two-year periods, in the case of Priority and one-year periods in the case of Accredo and Caremark, unless any party provides notice of termination. If these distributor agreements expire or terminate, under certain conditions, United Therapeutics may be required to repurchase unsold Remodulin inventory held by the distributors.

Patents And Proprietary Rights

      United Therapeutics’ success will depend in part on its ability to obtain and maintain patent protection for its products, preserve trade secrets, prevent third parties from infringing upon its proprietary rights and operate without infringing upon the proprietary rights of others in the United States and worldwide. (See Notes to

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      In January 1997, Glaxo Wellcome, Inc. (now GlaxoSmithkline PLC) assigned to United Therapeutics all rights to the use of the stable prostacyclin analog now known as Remodulin. For pulmonary hypertension, the patent does not expire in the United States until October 2009 (subject to extension — see Patent Term Extensions below) and until various dates from September 2009 to August 2013 in nine other countries. For congestive heart failure, the patent does not expire until May 2011 in the United States and from May 2011 to March 2012 in five other countries.

      In December 1996, Pharmacia & Upjohn Company (now Pfizer, Inc.) exclusively licensed to United Therapeutics certain patents, a patent application and know-how for the composition and production of the stable prostacyclin analog now known as Remodulin. United Therapeutics filed its own United States patent application for a new synthesis and production method for Remodulin in October 1997, which was granted in August 2002. United Therapeutics believes that its method is a substantial improvement over the Pharmacia method. United Therapeutics is using its unique synthesis method rather than the licensed Pharmacia method for the production of Remodulin. United Therapeutics also has three pending patent applications with respect to additional Remodulin synthesis improvements.

      In April 2002 and August 2003, Unither Pharmaceuticals, Inc. (UPI), a wholly owned subsidiary of United Therapeutics, entered into license agreements with AltaRex Corp. (now AltaRex Medical Corp.) for the exclusive worldwide rights (other than certain European and Middle Eastern countries) to certain patents relating to a platform of immunotherapeutic monoclonal antibodies. These antibodies are currently in various stages of clinical and preclinical testing, the lead compound of which, OvaRex, is in Phase III clinical trials. The compounds and the method of using the compounds are the subject of a combination of issued patents and pending applications in the United States and around the world. The issued patents have expiration dates ranging from 2017 to 2018. Additional inventions relating to the compounds may be owned jointly by AltaRex and UPI or individually by AltaRex, depending on the source of the invention.

      In March 2000, UPI entered into a license agreement with Synergy Pharmaceuticals, Inc. (Synergy) to obtain from Synergy the exclusive worldwide rights to certain patents relating to novel antiviral compounds known as iminosugars. The compounds are currently in late stages of preclinical testing or early clinical testing, and are the subject of a combination of issued patents and pending applications in the United States and around the world. The issued patents have expiration dates ranging from 2008 to 2017.

      In November 2000, UPI and Synergy amended the exclusive license agreement to include the development of new analogs of the licensed compounds. As part of this amendment, UPI agreed to directly assume Synergy’s role in funding ongoing research being conducted by the University of Oxford into analogs of the antiviral compounds being developed by UPI and Synergy. UPI will receive an exclusive license from the University of Oxford to all inventions arising from such research and entered into the first such license in November 2002 for the lead compound, UT-231B.

      In March 2003, UPI and Synergy entered into an Assignment and Assumption Agreement and a Redemption and Termination Agreement (together referred to as the Agreements). Under the Agreements, Synergy assigned to UPI all of its intellectual property rights in the glycobiology antiviral agents and exclusively sublicensed to UPI all of the intellectual property rights that had been licensed to it by third parties, the prosecution and maintenance of which are now the responsibility of UPI. Synergy also released

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      In 2000, Unither Pharma, Inc. acquired the exclusive license to patents related to arginine-based dietary supplements to enhance the level of naturally occurring nitric oxide in the vascular system from Stanford University and New York Medical College. The licenses cover worldwide territories and are valid for the life of the patents (ranging from 2010 to 2018). Unither Pharma will own all rights to all new products that may be or are derived from these licenses, including Unither Pharma’s HeartBar product line.

      United Therapeutics believes that some of the patents to which it has rights may be eligible for extensions of up to five years based upon patent term restoration procedures in Europe and in the United States under the Waxman-Hatch Act. For instance, under Waxman-Hatch, the United States patents relating to Remodulin could be extended by up to five years, giving the product patent protection until as late as October 2014. In addition, patent extensions are available under similar laws in Europe. United Therapeutics filed with the United States Patent and Trademark Office a patent term extension application for its patent covering the method of treating pulmonary arterial hypertension using Remodulin following its FDA approval. The application is pending.

Research & Development Expenditures

      United Therapeutics is engaged in research and development and has incurred substantial expenses for these activities. These activities generally include the cost of acquiring or inventing new technologies and products as well as their development. Research and development expenses during 2003, 2002 and 2001 totaled approximately $35.4 million, $26.8 million and $32.6 million, respectively. (See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Major Research and Development Projects for additional information regarding expenditures related to major research and development projects.)

Manufacturing and Supply

      United Therapeutics manufactures treprostinil, the bulk active ingredient in Remodulin. Baxter Healthcare Corporation (formerly Cook Imaging Corporation) formulates Remodulin for United Therapeutics. The agreement with Baxter expires in October 2004 and is renewable for successive eighteen month terms. An analytical testing laboratory, Cardinal Health (formerly Magellan Laboratories, Inc.), tests the purity of each batch of manufactured Remodulin. Medtronic MiniMed provides the delivery device used to administer Remodulin to patients.

      UT-231B, OvaRex, arginine and telemedicine products are currently manufactured by contract manufacturers. Prior to mid-2003, telemedicine products were manufactured by Medicomp at its facility in Florida.

      Although management believes that other manufacturers and suppliers could provide similar products, services and materials, there are a limited number of companies which could replace these manufacturers and suppliers. A change in supplier or manufacturer could cause a delay in the manufacture, distribution and research efforts associated with the respective product or result in increased costs.

Competition

      Many drug companies engage in research and development to commercialize products to treat cardiovascular, infectious and oncological diseases. United Therapeutics is aware of two existing treatments already approved in the United States for pulmonary arterial hypertension with which Remodulin competes. One is Flolan, an intravenously delivered prostacyclin marketed by GlaxoSmithkline, PLC, and the other is Tracleer, an oral endothelin antagonist marketed by Actelion, Ltd. Additional investigational drugs are being

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      In late 2001, the FDA approved Tracleer®, an oral treatment for pulmonary arterial hypertension in patients with NYHA Class III — IV symptoms. Tracleer is the first drug in a class of drugs known as endothelin antagonists. Endothelin constricts blood vessels and is elevated in patients with pulmonary arterial hypertension. Tracleer and other endothelin antagonists are being used in combination with Remodulin or Flolan since these drugs provide symptomatic relief in different ways and might complement each other to treat these seriously ill patients.

      Many companies market or are developing products that will compete with the HeartBar product line in the nutritional supplement market. However, United Therapeutics is the only company that owns the patent rights to use HeartBar’s key ingredient, arginine, for maintaining vascular function. One of the largest competitors agreed to pay a royalty to United Therapeutics on its arginine products. United Therapeutics is pursuing other potential infringers and is currently prosecuting three patent enforcement lawsuits.

      Holter and event monitoring analysis services and systems are provided by many local and regional competitors and a few national competitors.

      United Therapeutics competes with all of these competitors for customers, funding, access to licenses, personnel, third-party collaborators, product development and commercialization. Almost all of these companies have substantially greater financial, marketing, sales, distribution and technical resources, and more experience in research and development, product development and marketing, clinical trials and regulatory matters, than United Therapeutics, such as GlaxoSmithkline, Actelion, Ltd. and other competitors.

Governmental Regulation

      The research, development, testing, manufacture, promotion, marketing and distribution of drug products are extensively regulated by government authorities in the United States and in other countries. Drugs are subject to rigorous regulation by the FDA in the United States and similar regulatory bodies in other countries. The steps ordinarily required before a new drug may be marketed in the United States, which are similar to steps required in most other countries, include:

	•	Preclinical laboratory tests, preclinical studies in animals and formulation studies and the submission to the FDA of an investigational new drug application for a new drug;
	•	Adequate and well-controlled clinical trials to establish the safety and efficacy of the drug for each indication;
	•	The submission of a new drug application to the FDA; and
	•	FDA review and approval of the new drug application prior to any commercial sale or shipment of the drug.

      Preclinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. The results of preclinical testing are submitted to the FDA as part of an investigational new drug application. A 30-day waiting period after the filing of each investigational new drug application is required prior to the commencement of clinical testing in humans. At any time during this 30-day period or at any time thereafter, the FDA may halt proposed or ongoing clinical trials until the FDA authorizes trials under specified terms. The investigational new drug application process may be extremely costly and substantially delay development of United Therapeutics’ products. Moreover, positive results of preclinical tests will not necessarily indicate positive results in clinical trials.

      Clinical trials to support new drug applications are typically conducted in three sequential phases, but the phases may overlap. During Phase I, the initial introduction of the drug into healthy human subjects or

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	•	Assess the efficacy of the drug in specific, targeted indications;
	•	Assess dosage tolerance and optimal dosage; and
	•	Identify possible adverse effects and safety risks.

      If a compound is found to be potentially effective and to have an acceptable safety profile in Phase II evaluations, Phase III trials, also called pivotal studies, major studies or advanced clinical trials, are undertaken to further demonstrate clinical efficacy and to further test for safety within an expanded patient population at geographically dispersed clinical study sites.

      After successful completion of the required clinical testing, generally a new drug application is submitted. The FDA may request additional information before accepting a new drug application for filing, in which case the application must be resubmitted with the additional information. Once the submission has been accepted for filing, the FDA has ten months to review the application and respond to the applicant. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the new drug application to an appropriate advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee.

      If FDA evaluations of the new drug application and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter. An approvable letter will usually contain a number of conditions that must be met in order to secure final approval of the new drug application and authorization of commercial marketing of the drug for certain indications. The FDA may refuse to approve the new drug application or issue a not approvable letter, outlining the deficiencies in the submission and often requiring additional testing or information.

      The FDA may designate a product as an “orphan drug” if the drug is intended to treat a rare disease or condition. A disease or condition is considered rare if it affects fewer than 200,000 people in the United States. If an applicant obtains the first FDA marketing approval for a certain orphan drug, the applicant will have a seven-year exclusive right to market the drug for the orphan indication. The FDA has approved the orphan designation for Remodulin for the treatment of pulmonary arterial hypertension, a designation that includes both primary pulmonary hypertension and secondary pulmonary hypertension. OvaRex MAb (oregovomab) has received both orphan drug and fast track designations by the FDA for the treatment of patients with Stage III or IV epithelial adenocarcinoma of ovarian, tubal or peritoneal origin. Under the Food and Drug Administration Modernization Act (FDAMA), fast track designations are designed to help accelerate the regulatory approval process for key investigational drugs that meet an unmet medical need. The designations provide the potential for expedited FDA review and accelerated approval.

      Remodulin was approved by the FDA for the treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV symptoms to diminish symptoms associated with exercise. If regulatory approval of United Therapeutics’ other products is granted, it will similarly be limited to certain disease states or conditions. The manufacturers of approved products and their manufacturing facilities will be subject to continual review and periodic inspections. In addition, identification of certain side effects or the occurrence of manufacturing problems after any of its drugs are on the market could cause subsequent withdrawal of approval, reformulation of the drug, additional preclinical testing or clinical trials, and changes in labeling of the product.

      The Waxman-Hatch Act provides that patent terms may be extended during the FDA regulatory review period for the related product. This period is generally one-half the time between the effective date of an investigational new drug application and the submission date of a new drug application, plus the time between the submission date of a new drug application and the approval of that application, subject to a maximum extension of five years. Similar patent term extensions are available under European laws. United Therapeutics filed with the United States Patent and Trademark Office a patent term extension application for its patent

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      Outside the United States, United Therapeutics’ ability to market its products will also be contingent upon receiving marketing authorizations from the appropriate regulatory authorities. The foreign regulatory approval process may include some or all of the risks associated with FDA approval set forth above. The requirements governing the conduct of clinical trials and marketing authorization vary widely from country to country. At present, foreign marketing authorizations are applied for at a national level, although within Europe, procedures are available to companies wishing to market a product in more than one European Union (EU) member state.

      In the EU, marketing authorizations may be submitted to a centralized, a decentralized or a national level process. The centralized procedure is mandatory for the approval of biotechnology products and high technology products and is available at the applicant’s option for other products. The centralized procedure provides for the grant of a single marketing authorization that is valid in all EU member states. The decentralized procedure is available for all medicinal products that are not subject to the centralized procedure. The decentralized procedure provides for mutual recognition of national approval decisions, changes existing procedures for national approvals and establishes procedures for coordinated EU actions on products, suspensions and withdrawals. Under this procedure, the holder of a national marketing authorization for which mutual recognition is sought may submit an application to one or more EU member states, certify that the dossier is identical to that on which the first approval was based or explain any differences and certify that identical dossiers are being submitted to all member states for which recognition is sought. Within 90 days of receiving the application and assessment report, each EU member state must decide whether to recognize approval. The procedure encourages member states to work with applicants and other regulatory authorities to resolve disputes concerning mutual recognition. Lack of objection of a given country within 90 days automatically results in approval of the EU country. Following receipt of marketing authorization in a member state, United Therapeutics would then be required to engage in pricing discussions and negotiations with a separate prescription pricing authority in that country.

      United Therapeutics intends to secure European regulatory approval for the use of Remodulin for pulmonary arterial hypertension under the decentralized procedure and filed its first Marketing Authorization Application in France in February 2001. That review is currently ongoing. Regulatory applications for the use of Remodulin for pulmonary arterial hypertension in Canada and Israel were approved in October 2002. Regulatory applications in Switzerland and Australia were filed in 2001 and 2002, respectively, and preliminary indications of approval were received in December 2003.

      Arginine and telemedicine products are manufactured at contract facilities that are regulated by the FDA and required to follow the FDA’s current Good Manufacturing Practices. Telemedicine products are subject to FDA regulation as medical devices. The devices, manufactured and sold by Medicomp, have received marketing approval from the FDA under Section 510(k) of the Food, Drug and Cosmetic Act.

Employees

      United Therapeutics had approximately 160 employees as of March 1, 2004. The company also maintains active independent contractor relationships with various individuals most of whom are on month-to-month or annual consulting contracts. The company believes its employee relations are excellent.

Revenues and Industry Segments

      The information required by Regulation S-K Items 101(b) and 101(d) related to financial information about segments and financial information about sales is contained in Note 16 of the audited consolidated financial statements, which are included in this Annual Report on Form 10-K.

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Corporate Website

      United Therapeutics’ Internet website address is www.unither.com. United Therapeutics’ filings on Form 10-K, Form 10-Q, Form 3, Form 4, Form 5, and Form 8-K, and amendments thereto, are available free of charge through this internet website as soon as reasonably practicable after they are filed or furnished to the SEC.

Risk Factors

      This Annual Report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act and the Private Securities Litigation Reform Act of 1995 which are based on United Therapeutics’ beliefs and expectations as to future outcomes. These statements include, among others, statements relating to the following: the timing and outcome of clinical studies and regulatory filings; the achievement and maintenance of regulatory approvals; the ability to find alternate sources of supply and manufacturing for United Therapeutics’ products; the existence, capabilities and activities of competitors; the adequacy of owned or leased facilities for operations; the expectation not to pay dividends on common stock in the foreseeable future; the extent of United Therapeutics’ exposure to market risk; the ability to hold debt instrument investments to maturity; the statements identified as forward-looking statements in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K; and statements preceded by, followed by or that include the words “believes”, “expects”, “anticipates”, “intends”, “estimates”, “may” or similar expressions. These statements are subject to risks and uncertainties and United Therapeutics’ actual results may differ materially from anticipated results. Factors that may cause such a difference include, but are not limited to, those discussed below. United Therapeutics undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

Risks Related to Our Business

      Actual Revenues And Net Losses May Differ From United Therapeutics’ Projections.

      United Therapeutics has made public its projections of its estimated Remodulin annual revenue run rates, estimated average monthly net losses, a range of potential 2004 consolidated revenues and a projection of achieving profitability in 2004. These projections were based on numerous factors and assumptions taken into consideration at the time the estimates were made, which factors and assumptions are inherently subject to a degree of uncertainty. As a result, the actual revenues and net losses may be greater or less than projected. Even small differences in the factors and assumptions can lead to significant changes in United Therapeutics’ stock price. United Therapeutics had net losses of approximately $10.0 million in 2003, $23.7 million in 2002 and $37.3 million in 2001.

      Factors that could affect the accuracy of United Therapeutics’ expectations of revenues and profits include the following:

	•	Retention of current patients;
	•	Addition of new patients to replace patients who discontinue Remodulin therapy;
	•	Remodulin side effects, including impact of infusion site pain and reaction;
	•	Changes in the current pricing and dosing of Remodulin;
	•	Willingness of private insurance companies, Medicare and Medicaid to reimburse Remodulin at current pricing levels;
	•	Continued regulatory approval of Remodulin;
	•	Additional regulatory approvals in other countries for Remodulin;

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	•	Outcome of the Phase IV post-marketing study of Remodulin;
	•	Impact of other approved and investigational competitive products;
	•	Continued performance by current Remodulin distributors;
	•	Unforeseen expenses;
	•	Actual growth in sales of telemedicine and arginine products;
	•	Actual expenses incurred in future periods; and
	•	Establishment of additional strategic acquisitions or licensing arrangements.

      Factors that could affect the accuracy of United Therapeutics’ estimated net loss and capital requirements include the following:

	•	Continued regulatory approval of Remodulin;
	•	Retention and growth of patients treated with Remodulin;
	•	Collection of accounts receivable;
	•	Size, scope and outcome of the Remodulin post-marketing Phase IV clinical study;
	•	Size, scope and outcome of development efforts for existing and additional products;
	•	Future milestone and royalty payments;
	•	Cost, timing and outcomes of regulatory reviews;
	•	Rate of technological advances;
	•	Recovery of goodwill, intangible assets and investments in affiliates;
	•	Status of competitive products;
	•	Defending and enforcing intellectual property rights;
	•	Development of manufacturing resources or the establishment, continuation or termination of third-party manufacturing arrangements;
	•	Establishment, continuation or termination of third-party clinical trial arrangements;
	•	Development of sales and marketing resources or the establishment, continuation or termination of third-party sales and marketing arrangements; and
	•	Establishment of additional strategic acquisitions or licensing arrangements.

      United Therapeutics Has A History Of Losses And May Never Become Profitable.

      United Therapeutics has lost money since its inception in 1996, and its accumulated deficit was approximately $195.8 million at December 31, 2003. United Therapeutics had net losses of approximately $10.0 million, $23.7 million and $37.3 million in 2003, 2002 and 2001, respectively. United Therapeutics expects to incur additional losses and may never become profitable. United Therapeutics expects its quarterly and annual operating results to fluctuate, depending primarily on the following factors:

	•	Extent and timing of sales of Remodulin to distributors;
	•	Level of patient demand for Remodulin and other products;
	•	Levels of research and development, selling, general and administrative expenses; and
	•	Establishment of additional strategic acquisitions or licensing arrangements.

      Most of United Therapeutics’ pharmaceutical products are in clinical studies. United Therapeutics might not maintain or obtain new regulatory approvals for its pharmaceutical products and may not be able to sell its

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      If United Therapeutics Cannot Maintain Regulatory Approvals For Its Products, It Cannot Sell Those Products And Its Revenues Will Suffer.

      The process of obtaining and maintaining regulatory approvals for new drugs is lengthy, expensive and uncertain. The manufacturing, distribution, advertising and marketing of these products are subject to extensive regulation. Any new product approvals United Therapeutics receives in the future could include significant restrictions on the use or marketing of the product. Product approvals, if granted, can be withdrawn for failure to comply with regulatory requirements or upon the occurrence of adverse events following commercial introduction of the products. The FDA has approved Remodulin for the treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV symptoms to diminish symptoms associated with exercise. This approval is subject to United Therapeutics’ agreement to perform a post-marketing Phase IV clinical study to further assess the clinical benefits of Remodulin. Continued FDA approval of Remodulin is subject to the results of that trial. If approvals are withdrawn for a product, United Therapeutics cannot sell that product and its revenues will suffer. In addition, if product approvals are withdrawn, governmental authorities could seize United Therapeutics’ products or force United Therapeutics to recall its products. Finally, United Therapeutics and its officers and directors could be subject to civil and criminal penalties for failure to comply with these regulatory requirements.

      If United Therapeutics’ Products Fail In Clinical Studies, United Therapeutics Will Not Be Able To Obtain FDA And Foreign Approvals And Will Not Be Able To Sell Those Products.

      In order to sell its pharmaceutical products, United Therapeutics must receive regulatory approvals. To obtain those approvals, United Therapeutics must conduct clinical studies demonstrating that the drug and the delivery mechanism for the drug are safe and effective. If United Therapeutics cannot obtain approval from the United States Food and Drug Administration for a product, that product cannot be sold, and United Therapeutics’ revenues will suffer.

      On May 21, 2002, the FDA approved Remodulin (treprostinil sodium) Injection for the treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV symptoms to diminish symptoms associated with exercise. United Therapeutics agreed to perform a post-marketing Phase IV clinical study to further assess the clinical benefits of Remodulin. The Phase IV study must be completed by December 2005, and continued FDA approval is conditioned on the completion and outcome of the Phase IV study. As of February 2004, approximately 11 patients had been enrolled in the 39 patient Phase IV study. Additionally, United Therapeutics has initiated a pre-pivotal clinical study of Remodulin in critical limb ischemia. The lead glycobiology antiviral agent, UT-231B, has completed acute and chronic Phase I clinical dosing studies in normal volunteers and is currently enrolling a Phase II, proof-of-concept study. United Therapeutics is also currently conducting two Phase III pivotal studies of OvaRex for the treatment of metastatic ovarian cancer. United Therapeutics is still completing or planning pre-clinical studies for its other products. United Therapeutics’ ongoing and planned clinical studies might be delayed or halted for various reasons, including:

	•	The drug is not effective, or physicians think that the drug is not effective;
	•	Other investigational or approved therapies are viewed as more effective by physicians;
	•	Patients experience severe side effects during treatment;
	•	Patients die during the clinical study because their disease is too advanced or because they experience medical problems that are not related to the drug being studied;
	•	Patients do not enroll in the studies at the rate United Therapeutics expects;
	•	Drug supplies are not available or suitable for use in the studies; and
	•	The results of preclinical testing cause delays in clinical trials.

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      In addition, the FDA and foreign regulatory authorities have substantial discretion in the approval process. The FDA and foreign regulatory authorities may not agree that United Therapeutics has demonstrated that its products are safe and effective.

      United Therapeutics’ Products May Not Be Commercially Successful Because Physicians And Patients May Not Accept Them.

      Even if regulatory authorities approve United Therapeutics’ products, these products may not be commercially successful. United Therapeutics expects that most of its products, including Remodulin, which is already approved by the United States Food and Drug Administration, will be very expensive. Patient acceptance of and demand for United Therapeutics’ products will depend largely on the following factors:

	•	Acceptance by physicians and patients of United Therapeutics’ products as safe and effective therapies;
	•	Reimbursement of drug and treatment costs by third-party payers such as Medicare, Medicaid and private insurance companies;
	•	Pricing of alternative products;
	•	Convenience and ease of administration of United Therapeutics’ products; and
	•	Prevalence and severity of side effects associated with United Therapeutics’ products, including the infusion site pain and reaction associated with use of Remodulin.

      Discoveries Or Developments Of New Technologies By Others May Make United Therapeutics’ Products Obsolete.

      Other companies may conduct research, make discoveries or introduce new products that render all or some of United Therapeutics’ technologies and products obsolete or not commercially viable. Researchers are continually making new discoveries that may lead to new technologies to treat the diseases for which United Therapeutics’ products are intended. In addition, alternative approaches to treating chronic diseases, such as gene therapy, may make United Therapeutics’ products obsolete or noncompetitive. One therapy approved