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United Therapeutics (UTHR) Q4 Earnings & Sales Beat Estimates

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United Therapeutics Corporation UTHR reported adjusted earnings of $3.34 per share for the fourth quarter of 2018, which beat the Zacks Consensus Estimate of $2.54. However, the bottom line declined 14.1% year over year.

Adjusted earnings excluded the impact of share-based compensation expenses, impairment charge related to investment in a privately-held company, one-time license fee and some other items. Including these items, reported earnings came in at $1.48 per share compared with 43 cents in the year-ago quarter.

Revenues for the reported quarter were $381.4 million, beating the Zacks Consensus Estimate of $357.7 million. Revenues, however, fell 17.9% year over year owing to loss of exclusivity for Adcirca.

Shares of United Therapeutics rose almost 3% on Feb 27 following the impressive fourth-quarter results. In fact, the stock has risen 15.3% this year so far.

Quarter in Detail

United Therapeutics markets four products for the treatment of PAH – Remodulin, Tyvaso, Adcirca and Orenitram. Please note that United Therapeutics bought exclusive rights to commercialize Adcirca (tadalafil) for the treatment of PAH in the United States from Eli Lilly LLY in November 2008. Eli Lilly markets tadalafil as Cialis for erectile dysfunction.

Adcirca sales were $41.7 million, down 65% year over year as generic competition resulted in lower volumes in the quarter. Adcirca experienced loss of exclusivity in May this year and a generic formulation was launched by Mylan in August and by Dr Reddy’s earlier this month. A higher allowance for product returns offset a price increase by Lilly and also hurt Adcirca’s sales.

Orenitram sales amounted to $49.6 million in the reported quarter, up 3.3% year over year due to an increase in the number of patients being treated with the drug and price hikes. Remodulin sales were $159.1 million, down 11.7% year over year owing to lower sales in international markets, which offset higher U.S. sales. Tyvaso sales totaled $106.9 million, up 15.7% year.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $24.1 million were down 3.2% year over year.

Research and development (R&D) expenses escalated 52.9% to $139.9 million mainly on account of up-front payment of $45.0 million made to MannKind related to the acquisition of latter’s phase III-ready investigational drug-device combination product, Treprostinil Technosphere in October.

General and administrative (G&A) expense rose 13% to $58.1 million while sales and marketing (S&M) expense declined 4.0% to 16.9 million.

2018 Results

Full-year 2018 sales declined 5.7% to $1.63 billion, slightly beating the Zacks Consensus Estimate of $1.60 billion.

Adjusted earnings for 2018 were $15.36 which surpassed the Zacks Consensus Estimate of $15.14 per share. However, earnings declined 7% year over year.

Pipeline Update

United Therapeutics is working on expanded indications for some of its marketed products like Orenitram and Tyvaso. The company, at present, has six phase III programs in the fields of cardiopulmonary diseases and oncology. A phase III FREEDOM-EV study evaluated an oral combination therapy of Orenitram – OreniPlus.

In August, United Therapeutics announced preliminary data from the study. The study met the primary endpoint, showing that Orenitram in combination with an oral PAH background therapy, delayed disease progression. United Therapeutics has submitted regulatory application in the United States to get FREEDOM-EV data included on the label of Orenitram.

Meanwhile, a phase III BEAT study is evaluating Tysuberprost - esuberaprost in combination with Tyvaso while the phase II/III DISTINCT study is evaluating dinutuximab, the active ingredient in Unituxin, for small cell lung cancer. United Therapeutics expects to unblind data from both the studies in March.

United Therapeutics is working on bringing multiple second generation Remodulin drug delivery systems to drive Romudulin sales growth. In July, United Therapeutics gained FDA approval for Remodulin Injection in the Implantable System for Remodulin (“ISR”).

The company had developed this implantable pump for delivering Remodulin intravenously in collaboration with Medtronic, Inc. MDT. United Therapeutics and Medtronic pursued parallel regulatory filings related to the device and the drug. The company expects to be ready for commercial launch by early 2019.

United Therapeutics also developed RemUnity, a pre-filled, semi-disposable pump system for subcutaneous delivery of Remodulin (RemUnity) in partnership with DEKA. In February 2018, DEKA filed RemUnity with the FDA (510(k) filing that was accepted for review by the FDA. Further, a regulatory application for Trevyent, the drug device pipeline product for PAH, acquired from the August merger with SteadyMed, is expected to be resubmitted during the first half of 2019. RemUnity and Trevyent, if approved, will provide two expanded options for patients on subcutaneous Remodulin.

RemoPro, a pain-free subcutaneous Remodulin prodrug, is in phase I studies.

Licensing Deals

In 2018, United Therapeutics signed four major agreements to acquire new product candidates, the latest being the worldwide rights to manufacture and develop/commercialize Arena Pharmaceuticals, Inc.’s ARNA oral, potent, once-daily IP receptor agonist ralinepag. Ralinepag is being developed in late-stage studies for PAH. The deal, which was the largest for United Therapeutics to date, was announced in November 2018 and concluded last month. Upon closing, United Therapeutics paid Arena $800 million while the latter is also entitled to potential milestone payments of up to $400 million.

We believe that with the deal United Therapeutics adds a quality PAH asset to its portfolio. Considering the extensive experience it has in the PAH market, it is strongly placed to get this pipeline candidate approved and make it a commercial success. Further, the purchase of ralinepag removes potential completion to United Therapeutics’ PAH products.

United Therapeutics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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