United Therapeutics: Thrilling Firm With A Massive Downside

That is my inaugural tackle United Therapeutics (NASDAQ:UTHR), a industrial stage biotech with lengthy rising earnings and a pleasant product portfolio. Its lead product generates greater than 50% of its revenues. It has been combating tooth and nail to forestall aggressive merchandise from coming into the market.

To date, it has been profitable on this respect; nonetheless, it’s working out of choices to proceed this battle. On this article, I’ll focus on the overall funding deserves of United Therapeutics and its massive aggressive problem.

On this article, I’ll reference its Q1, 2024:

1. earnings name (the “CALL“);
2. 10-Q (the “10-Q“);
3. presentation (the “PRESENTATION“).

I additionally embrace a number of references to its newest 10-Okay (the “10-Okay“)

With growing revenues, United Therapeutics has grown its market cap to ~$12 billion

The excerpt under from presentation slide 10 units out United’s Q1, 2024 product revenues with their share change from Q1, 2023:

Every of its high 4 merchandise are in sturdy double-digit development mode, with solely Remodulin lagging in single digit development. The Tyvaso (treprostinil) DPI and Nebulized pair lead United’s product franchise development charges by a superb margin. They’re its largest income producer, making up greater than 50% of general product income.

PRESENTATION slide 25 under supplies an extended vary view together with extra general granularity on this key product pair; this chart is useful in distinguishing between the 2 out there codecs of Tyvaso.

The next chart from the 10-Okay (p. 3) units out key information for United Therapeutics’ industrial product franchise:

It additionally exhibits how extremely concentrated its medicines are in therapy of pulmonary arterial hypertension [PAH] in its numerous manifestations. As said on United’s web site:

PH-ILD stands for pulmonary hypertension related to interstitial lung illness, a severe and progressive illness.

When it comes to its close to and intermediate future, its ambitions are restricted, as mirrored by the chart under from the 10-Okay (p. 8):

IPF and PPF refer to 2 completely different manifestations of pulmonary fibrosis, idiopathic and progressive, additionally addressing lung ailments.

Shifting to a extra distant horizon, United Therapeutics’ ambitions explode to the very best of high-tech

PRESENTATION slide 11 illustrates the total extent of United’s ambitions:

Over the subsequent indeterminate medium-term future, it’s glad with its pulmonary targeted franchise. It pegs this as pointed in the direction of income era, aggregating $Eight billion.

It supplies no product breakdown or useful timeline for attaining this purpose. Accordingly, it’s a weak underpinning for an actionable calculation, notably when one considers its aggressive setting as mentioned under.

On a longer-term foundation, slide 11 references “REVOLUTION Organ Manufacturing”; it pegs upwards of $16 billion in income era potential. This appears to be the stuff of science fiction. United Therapeutics is severely targeted on advancing its applied sciences into the clinic and past.

PRESENTATION slide 19 summarizes the breadth of its applications directed in the direction of this finish:

PRESENTATION Slide 21 captioned “Xenotransplants March Towards the Clinic” focuses on what I presume to be its most superior organ program:

With human medical trials not anticipated to start till 2025, this program is clearly in early days.

Feisty competitors raises ugly query marks as to Tyvaso’s future

Tyvaso is United’s largest grower by an enormous margin. New competitors on this market can not help however injury United’s prospects. It has been combating such threats for a very long time. A strongly worded article by a Searching for Alpha analyst earlier this yr posited Liquidia’s (LQDA) YUTREPIA as a very harmful competitors.

United has been warding off this risk with some success since again in 2020. Its 10-Q devotes a full web page below the heading “Litigation with Liquidia Applied sciences, Inc” explaining this difficult battle. The reason is replete with obscure technical phrases that defeat prepared summarization.

There are a number of lawsuits overlaying a number of patents, with a number of motions, rulings on motions and judgements and appeals. It’s troublesome to evaluate when competitors will begin to hit dwelling. In Liquidia’s Q1 2024 earnings name, it explains how it’s totally able to launch its YUTREPIA as quickly as it’s free of its authorized restraints.

Judging by a latest Searching for Alpha information report after hours on 05/31/2024 the time when it could face competitors is drawing inexorably nearer. Most just lately, a district court docket denied United Therapeutics’ request for a preliminary injunction over Tyvaso competitor YUTREPIA.

Throughout its latest convention name, Liquidia was assured that YUTREPIA’s mechanism for delivering treprostinil was superior to each these out there for Tyvaso. Liquidia CEO Jeffs famous it isn’t the molecule treprostinil which results in discontinuance of use however moderately its administration. It believes:

…physicians and sufferers are anticipating a brand new alternative, one which delivers a readily titratable and sturdy inhaled formulation of treprostinil utilizing a conveyable, patient-friendly, low-resistance dry powder inhaler with demonstrated excessive affected person choice and satisfaction. YUTREPIA is that alternative and has the very actual potential to turn into the primary in alternative in best-in-class course of cyclin on this rising market alternative.

Conclusion

Efficient 06/01/2024 United Therapeutics scores a purchase on its metrics as calculated by Searching for Alpha’s Quant rankings with a B+ for worth, a C+ for development and an A+ for profitability. I’d usually be loath to demur from such a rating.

Nevertheless, in United Therapeutics’ case, the uncertainty attendant upon its lengthy battle with YUTREPIA offers me pause. Tyvaso is each its >50% income generator and its strongest grower.

YUTREPIA supplies credible threats to each metrics. United has been holding it sufficiently at arm’s size to guard itself from severe income affect for a few years. The time will come when this tactic will now not be efficient.

I submit that the time is sufficiently near render United Therapeutics unattractive for brand new cash. Accordingly, I price it a Maintain.