United Therapeutics (UTHR) Down Despite Q1 Earnings Beat

United Therapeutics Corporation (NASDAQ:UTHR) reported adjusted earnings of $3.58 per share for the first quarter of 2019, which beat the Zacks Consensus Estimate of $2.64. However, the bottom line declined 5% year over year.

Adjusted earnings excluded the impact of share-based compensation expenses, one-time license fee and a tax benefit. Including these items, reported loss per share was $11.32 per share against earnings of $5.57 in the year-ago quarter. The one-time license fee comprised an $800.0 million upfront payment to Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) and $12.5 million payment to MannKind Corporation (NASDAQ:MNKD) .

In January this year, United Therapeutics acquired worldwide rights to manufacture and develop/commercialize Arena’s oral, potent, once-daily IP receptor agonist ralinepag. Ralinepag is being developed in late-stage studies for pulmonary arterial hypertension (PAH). In October last year, United Therapeutics in-licensed MannKind’s phase III-ready investigational drug-device combination product, Treprostinil Technosphere. The product combines MannKind’s dry inhalation technology with treprostinil for the treatment of PAH.

Revenues for the reported quarter were $362.6 million, which beat the Zacks Consensus Estimate of $330.5 million. Revenues, however, fell 7% year over year owing to loss of exclusivity for Adcirca.

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 (NYSE:LLY) in November 2008. Eli Lilly markets tadalafil as Cialis for erectile dysfunction.

Adcirca sales were $20.0 million, down 80% year over year as generic competition resulted in lower volumes in the quarter. Adcirca experienced loss of exclusivity in May last year and a generic formulation was launched by Mylan (NASDAQ:MYL) in August.

Orenitram sales amounted to $58.4 million in the reported quarter, up 12% year over year due to an increase in the number of patients being treated with the drug and price hikes. Remodulin sales were $155.5 million, up 23% year over year due to higher sales in both the United States and international markets. Sales in the United States rose due to an increase in the number of patients and a price increase implemented last year. Tyvaso sales totaled $103.8 million, up 10% year driven by patient growth and price increase.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $24.9 million were up 38% year over year due to an increase in the number of vials sold.

Research and development (R&D) expenses were $893.8 million in the quarter million mainly on account of the one-time license fee compared to $58.2 million in the previous quarter.

General and administrative (G&A) expense rose 2% to $53.9 million. Sales and marketing (S&M) expense rose 2% to 13.6 million.

Pipeline Update

United Therapeutics is working on expanded indications for some of its marketed products like Orenitram and Tyvaso. A phase III FREEDOM-EV study evaluated an oral combination therapy of Orenitram – OreniPlus. In August 2018, 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.

However, in April, United Therapeutics announced that a phase III BEAT study did not meet its primary endpoint. The study was evaluating pipeline candidate esuberaprost in combination with Tyvaso as Tysuberprost in patients with PAH who showed signs of deterioration on Tyvaso or had a less than optimal response to Tyvaso treatment. The primary endpoint of delayed time to first clinical worsening event was not successfully met in the study. As a result, United Therapeutics decided to discontinue further development of esuberaprost.

Other phase III programs include Tyvaso-ILD (Tyvaso being evaluated in patients with PAH associated with idiopathic pulmonary fibrosis – phase III INCREASE study), OreniLeft (Orenitram for PAH with left ventricular diastolic dysfunction – phase III SOUTHPAW study), gene therapy (Aurora-GT) for PAH (phase II/III SAPPHIRE study) and inhaled treprostinil in PAH patients who have COPD (phase III PERFECT study).

The company is also working on bringing multiple second-generation Remodulin drug delivery systems to drive Romudulin sales growth. In July last year, United Therapeutics gained FDA approval for Remodulin Injection in the Implantable System for Remodulin (ISR). United Therapeutics had developed this implantable pump for delivering Remodulin intravenously in collaboration with Medtronic (NYSE:MDT). United Therapeutics and Medtronic pursued parallel regulatory filings related to the device and the drug. On the first-quarter conference call, the company said it expects to be ready for commercial launch by the second half of this year, delayed from earlier expectations of being ready by early 2019.

United Therapeutics also developed 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 per a 510(k) filing that was accepted for review by the FDA. An approval is expected soon. RemoPro, a pain-free subcutaneous Remodulin prodrug, is in phase I studies.

Meanwhile, following the August merger with SteadyMed, United Therapeutics added the latter’s drug device pipeline product Trevyent for PAH to its portfolio, which could have posed competition to ISR. Trevyent is a single-use, pre-filled pump that has been developed by SteadyMed to deliver a two-day supply of treprostinil subcutaneously using SteadyMed’s PatchPump technology to treat PAH. Though SteadyMed received a refuse-to-file letter from the FDA for want of further information, SteadyMed intends to resubmit it during the first half of 2019. RemUnity and Trevyent, if approved, will provide two expanded options for patients on subcutaneous Remodulin.

Despite the first-quarter earnings and sales beat, shares of United Therapeutics declined more than 3% on May 1 probably due to the delay in the commercial launch timeline of ISR. In fact, the stock has declined 8.8% this year so far against the industry’s increase of 9.5%.

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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