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Neutral on United Therapeutics

Zacks Equity Research

We recently reiterated our Neutral recommendation on United Therapeutics (UTHR). United Therapeutics is focused on the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases.

The company's lead product is Remodulin (treprostinil), indicated for the treatment of pulmonary arterial hypertension (:PAH) in patients with New York Heart Association (:NYHA) Class II-IV symptoms. Remodulin is approved for both subcutaneous (:SC) and intravenous (:IV) use.

The company received approval for an inhaled version of treprostinil, which is being marketed under the trade name Tyvaso. In May 2009, United Therapeutics received US Food and Drug Administration (:FDA) approval to market Adcirca (tadalafil) for the treatment of PAH. The company licensed certain exclusive rights to tadalafil from Eli Lilly (LLY) in November 2008.

We believe United Therapeutics is well-positioned to gain share in the PAH market. Lead product, Remodulin, continues to look very strong in both the intravenous and subcutaneous forms. With the approval of Adcirca and Tyvaso, the company has a varied range of therapies available for the treatment of PAH. We believe United Therapeutics’ PAH product portfolio will drive top-and bottom-line growth.

The company is working on strengthening its PAH franchise further through the FDA approval of an oral version of treprostinil. United Therapeutics filed for approval of oral treprostinil in late December 2011 with a response from the FDA expected by October 27, 2012. However, given the mixed data on the candidate, our expectations for oral treprostinil gaining approval in 2012 are low.

We are concerned about the company’s dependence on Remodulin for revenues. Remodulin, which accounted for 57.9% of total sales in 2011, is currently facing a generic challenge from Sandoz, Novartis’ (NVS) generics unit. The company needs to develop products that could help make up for the loss of revenues in the event of genericization of Remodulin. 

Although United Therapeutics has several candidates in its pipeline, these products are still in too early stages of development to get excited about. We were disappointed to hear that the company has suspended its plans to commence phase III studies with its most advanced pipeline candidate, beraprost-MR, in December 2011.

With beraprost-MR failing to meet its primary and secondary endpoints in a phase II study, United Therapeutics is now working on designing new trials and dosing regimens for the candidate. Given the early stage nature of the rest of the pipeline, we do not see any near-term pipeline catalysts that could drive the stock.

Given the lack of significant near-term catalysts, we expect the stock to remain range bound in the coming months and remain Neutral on the stock. United Therapeutics carries a Zacks #3 Rank (short-term Hold rating).

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