An Undervalued Biotech That Dominates Its Field

Today I want to look closer at United Therapeutics (UTHR).

United Therapeutics is a specialty pharmaceutical company, focusing on very small patient indications that allow it to win orphan drug designation, which protects its products for long periods of time and allows premium pricing. Specifically, United focuses on drugs that extend the lifespan for suffers of pulmonary arterial hypertension (PAH), a dangerous disease of high lung blood pressure that, sadly, is fatal to most sufferers.

United’s drugs are designed to expand the lifespan of PAH sufferers, and allow them to be more active than they would be able to achieve otherwise. Its oldest and largest product, Remodulin (35% of sales), is administered by IV or injection. Tyvaso (30%) is an inhaled form of treprostinil (the active ingredient in Remodulin). Orenitram (9%) is the first orally ingested form of treprostinil. Adcirca (23%) is an early-stage PAH treatment based on a different active ingredient, tadalafil.

What’s The Growth Plan?

Despite more than tripling revenues over the past 6 years, United continues to deliver solid growth metrics. In the most recent quarter, sales grew 17% year-over-year. Both of United’s legacy products, Remodulin and Tyvaso, continued to show modest growth at 3% and 4%, respectively.

But the real story is in its newer, orally-ingested formulations. Adcirca continues to show remarkable growth, expanding sales 25% last quarter, particularly impressive when you consider that this drug is just slightly different than Eli Lilly’s Cialis. But the real star for United is Orenitram, which was launched in 2014.

Orenitram is the first oral version of treprostinil, representing a much more palatable and simpler dosing method than either Remodulin or Tyvaso. So it makes sense that some of Orenitram’s growth (85% year-over-year last quarter) is coming from cannibalization of those 2 products. But what is very interesting is that 70% of new Orenitram subscribers are new to therapy. This indicates that UTHR is expanding its patient base – a great thing for the company (more revenues without cannibalization), but also a great thing for its patients as more PAH sufferers are given a chance at better quality-of-life.