United Therapeutics: Meeting Unmet Clinical Needs

Price: $47.83
Earnings Growth: 106%
Projected Sales Growth: 17%
Forward P/E: 9.55
Market Cap: $2.55 billion

Why It's Featured: Explosive growth in sales and earnings with a strong drug pipeline; exceptional margins.
Danger Zones: FDA approval of new drugs.

United Therapeutics Corp. UTHR, a biotechnology company, engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases in the United States and internationally.  It offers Remodulin, Tyvaso, and Adcirca for the treatment of pulmonary arterial hypertension (PAH).

The company also develops Oral Treprostinil (UT-15C), a new drug application filed with the United States Food and Drug Administration for the treatment of PAH.  Its development products under Phase III clinical trials include Oral Treprostinil (UT-15C) Combination Therapy for PAH; Ch14.18 monoclonal antibody (MAb) targeting Neuroblastoma; and Remodulin for the treatment of PAH in the United States, the United Kingdom, France, Germany, Italy, and Japan.

Development products under Phase I clinical trials comprise Beraprost-MR for PAH in North America, Europe, Mexico, South America, Egypt, India, South Africa, and Australia; 8H9 MAb targeting Metastatic brain cancer; and IW001 for the treatment of Idiopathic pulmonary fibrosis and primary graft dysfunction.

Its pre-clinical stage products consist of Glycobiology Antiviral Agents for viral infectious diseases; PLacental eXpanded cells targeting PAH; and pulmonary tissue replacement and remodeling products for the treatment of end-stage lung disease. The company serves pharmaceutical wholesalers through specialty pharmaceutical distributors and other distributors. United Therapeutics Corporation was founded in 1996 and is headquartered in Silver Spring, Maryland.

What caught my eye about UTHR was the jump in sales last year coupled with a more than 100% boost in earnings.  Revenues climbed from $604 million in 2010 to $743 million in 2011.  Earnings went from $1.78 in '10 to $3.67.  But that was last year.  What about this one and beyond?

Consenus from 16 analysts is that this year will be another good one.  They see earnings climbing to $4.65, then forecast $5.01 for 2013.  Next earnings release will be on July 25 for second quarter results.  Expect $1.13 compared to $1.18 last year in the second.  For the third period, consensus is for $1.15 vs $1.38 (the range among analysts is between 85 cents and $1.64 for the third quarter).

As for sales, predictions are for $867.92 million this year, up 16.6% from last year's $743.18 million.  Next year, look for $968.79 million, another 11.6% gain.

Driving those numbers is the demand for three products: Remodulin, Tyvaso and Adcirca.  The last two are rather new to the market, gaining FDA approval in 2009.  Analysts see demand only increasing for these drugs.  Helping the bottom line: as sales are ramping operating expenses are being cut.  Another positive: international slaes for Remodulin are just beginning as it's been approved in 36 countries.  It's already in Europe and is scheduled to sell in China and Japan within a year.  The drug is for PAH. 

The pipeline is full at UTHR.  The most recent filing for a new drug was for an oral version of Trepostinil, another PAH therapy.  Management believes it will receive a prescription drug user fee act date in October.  That expedites the regulatory approval process.  (For more stock ideas, see The Online Investor: www.theonlineinvestor.com)

- Essential Numbers:
- Trailing P/E: 10.08
- Price to sales: 3.26
- Price to book: 2.5
- Operating margin: 50.04%
- Profit margin: 34.69%
- Return on equity: 27.54%
- Return on asset: 16.11%
- Cash: $408.97 million
- Cash per share: $7.62
- Total debt: $268.16 million
- Debt to equity: 26.17%
- Current ratio: 3.27
- Book value per share: $19.09
- Beta: 1.21
- Change in the last 52 weeks: - 11.89%
- Shares outstanding: 53.68 million
- Float: 49.77 million
- Held by insiders: 7.07%
- Held by institutions: 96.8%
- There is no dividend.

Two numbers stand out from above: the first is the Operating margin of 50.04%.  The second is the Profit margin of 34.69%.  It's rare to find a company that delivers those margins.  And while the P/E ratio is relatively low, the price to book and price to sales ratios reflect investors' enthusiasm for the stock.  Still, with outstanding drugs and more in the pipeline, this stock deserves further scrutiny by most investors.

- Company website: www.unither.com

- Ted Allrich
June 22, 2012