Pulmonary arterial hypertension doesn't affect a lot of
people, at least by the standards of other diseases.
But those who suffer from it face dire circumstances if they
don't get the right treatments.
PAH is a chronic, life-threatening condition in which
sufferers experience abnormally high blood pressure in the
arteries between the heart and lungs. The negative impact on the
heart and lungs is such that sufferers have a limited capacity to
exercise and a reduced life expectancy.
According to most estimates, PAH affects anywhere from 100,000
to 200,000 people worldwide. That's not a huge number compared
with the many millions who suffer from diabetes, heart disease,
HIV and other conditions.
But the seriousness of PAH, combined with the precise nature
of the products needed to combat it, have created a lucrative
market for companies that specialize in PAH treatments.
One of those companies isUnited Therapeutics (
). Just about all of its revenue comes from PAH treatments.
Its leading seller, Remodulin, is designed to diminish the
symptoms associated with exercise for PAH sufferers. It can be
administered as a continuous subcutaneous infusion or continuous
Remodulin has been United Therapeutics' core product for years
and still accounts for about half of overall revenue.
The company also sells a pair of newer products: Tyvaso, an
oral inhalant used to improve a patient's exercise ability; and
Adcirca, a tablet that is also used to improve a patient's
The popularity of these treatments among physicians has helped
United Therapeutics more than double its annual revenue over the
past couple of years.
Analysts expect continued growth in coming years as Tyvaso and
Adcirca gain more traction with the medical community.
"Because Tyvaso and Adcirca just launched a couple years back,
they still have plenty of growth in front of them," said Liana
Moussatos, a Wedbush Securities analyst.
Tyvaso contributed sales of $81.2 million during the second
quarter. That was up 31% from the prior year and well ahead of
most estimates. Tyvaso is used by about 30% of class 3 PAH
patients in the U.S., says JPMorgan analyst Geoff Meacham.
Revenue from parenteral Remodulin -- the subcutaneous and
intravenous versions -- climbed 5% to $110.4 million during the
quarter. That was slightly below consensus. Adcirca sales climbed
79% to $30.2 million, topping views.
Overall revenue rose 23% to $225.6 million. It was the 12th
time in the last 13 quarters United Therapeutics has grown the
top line 20% or more.
Second-quarter earnings gained 14% to $1.34 a share, easily
topping Wall Street views for $1.10 a share.
United Therapeutics' stock price rose 4.5% to 52.68 on the
results. Shares touched a 12-month high of 55.46 two days
Analysts polled by Thomson Reuters expect annual earnings to
rise 37% this year and 6% in 2013.
Much of United Therapeutics' focus in coming quarters will be
on finding new markets for Remodulin, which has begun to see
sales flatten out in the U.S.
Remodulin should get a boost from the approval of its
intravenous formulation in Europe.
"United anticipates adoption in Europe to have a similar
impact to that observed in the U.S., where the IV formulation
also reinvigorated sales of the subcutaneous formulation,"
Meacham noted in a report.
United Therapeutics also looks to launch Remodulin in Japan
and China. On a recent conference call, management said both
launches could happen in the next couple of years.
There should be no shortage of business, Moussatos says. "Both
markets are wide open for pulmonary hypertension drugs."
United Therapeutics also seeks U.S, approval for an oral
version of Remodulin. The Food and Drug Administration is
expected to make a decision on the oral version in late October.
Approval might be a long shot, however, because of problems the
treatment had in clinical trials.
"In our view, the probability of approval is low, given mixed
phase 3 trial results," Meacham noted. "Even in the case of
approval, we suspect the label could be relatively narrow."
United Therapeutics' emphasis on finding new markets and uses
for Remodulin is important because the product is due to lose
patent protection in late 2014.
Earlier this year,Novartis' (
) Sandoz unit announced plans to seek approval for a generic
version of Remodulin.
United Therapeutics answered that announcement by filing a
lawsuit against Sandoz for infringing on three patents relating
No decision on the suit is expected anytime soon.
Regardless of how that battle turns out, analyst Moussatos
says the threat from generic Remodulin might be overstated.
"The Street is concerned that a generic rival will erode sales
for Remodulin, but I don't think the penetration will be that
significant," she said.
That's because pulmonary hypertension physicians "tend to push
off generics as long as possible," Moussatos added. "This is a
very serious condition for patients, and generic formulations can
be a little different from the original formulations. Physicians
don't want to take any chances because patients could die."