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United Therapeutics Gains on Q1 Earnings

Zacks Equity Research

Shares of United Therapeutics (UTHR) continued to gain on the company’s first quarter results – shares were up 12.4% over two trading sessions since the earnings release.

The company reported earnings of $2.43 per share in the first quarter, well above the Zacks Consensus Estimate of $1.57 and the year-ago earnings of $1.19 per share. Revenues, which increased 18.1% to $289.4 million, missed the Zacks Consensus Estimate of $296.0 million.

The Quarter in Detail

Remodulin revenues increased 18.7% from the year-ago quarter to $136.1 million. Revenues improved 13.5% sequentially.

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 $107.1 million (up 13.1%) and $41.4 million (up 22.3%), respectively, to first quarter revenues.

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 is expected to continue through mid-May.

R&D expenses for the first quarter declined 75.3% to $12.4 million mainly due to lower share-based compensation expense.

SG&A spending decreased 57.7% from the year-ago quarter to $30.2 million due to lower share-based compensation costs.

Our Take

United Therapeutics’ first quarter results were mixed with the company beating on earnings thanks to lower stock-based compensation expense and missing on revenues. Although Tyvaso’s performance was a bit disappointing, Remodulin improved significantly. We expect investor focus to remain on the commercialization of Orenitram, the Sandoz litigation and results on Actelion’s (ALIOF) pulmonary arterial hypertension candidate, selexipag, which should be out shortly.

United Therapeutics is a Zacks Rank #3 (Hold) stock. A better-ranked stock in the health care sector is Gilead Sciences Inc. (GILD) which carries a Zacks Rank #1 (Strong Buy).

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