United Therapeutics (UTHR) Up on Q2 Earnings & Revenue Beat


United Therapeutics, (UTHR) which gained 8.1% immediately after the release of second quarter results, lost some ground in the subsequent trading session. Overall, shares are up 2.7% since earnings came out.

The company’s second quarter 2014 earnings were better than expected at $2.10 per share. This was well above the Zacks Consensus Estimate of $1.66 and the year-ago earnings of $1.52 per share. Revenues, which increased 15% to $322.8 million, surpassed the Zacks Consensus Estimate of $311 million. Revenues benefited from the continued uptake of existing products and the launch of Orenitram.


The Quarter in Detail

Remodulin revenues increased 11.1% from the year-ago quarter to $138.2 million.

United Therapeutics is working on introducing Remodulin in the Japanese and Chinese markets which would bring in incremental sales. Moreover, the company has an agreement with Medtronic, Inc. (MDT) for the development of an implantable pump to deliver Remodulin.

Meanwhile, Tyvaso and Adcirca contributed $121.2 million (up 10.8%) and $55.3 million (up 26.5%), respectively, to second quarter revenues. Orenitram, which was launched in the second quarter, delivered sales of $6.6 million.

We note that United Therapeutics is facing a patent challenge for Remodulin injection from Sandoz. United Therapeutics has filed a patent infringement lawsuit against Sandoz. The trial concluded in mid-June and a decision should be out shortly.

R&D expenses for the second quarter declined 27.2% to $39.7 million mainly due to lower share-based compensation expense.

SG&A spending decreased 4.7% from the year-ago quarter to $68 million due to lower share-based compensation costs.

Our Take

United Therapeutics’ second quarter earnings surpassed expectations thanks to lower stock-based compensation expense and higher revenues. We expect investor focus to remain on the commercialization of Orenitram and the outcome of the Sandoz litigation.

United Therapeutics is a Zacks Rank #1 (Strong Buy) stock. Some equally well-ranked stocks in the health care sector include Actelion Ltd. (ALIOF) and Celgene Corp. (CELG).

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