United Therapeutics Gets Lift From Expanded Lineup

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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.

PAH Revenue

One of those companies isUnited Therapeutics ( UTHR ). 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 intravenous infusion.

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 exercise ability.

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 later.

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.

Approval Odds

"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' ( NVS ) 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 to Remodulin.

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."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: NVS , UTHR

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