United Therapeutics (UTHR) Down Despite Q1 Earnings Beat

United Therapeutics Corporation 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. ARNA and $12.5 million payment to MannKind Corporation 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 Corporation Price, Consensus and EPS Surprise

United Therapeutics Corporation Price, Consensus and EPS Surprise | United Therapeutics Corporation Quote

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 $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 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.