Credit Suisse: United Therapeutics Becoming More Fundamentally Driven

United Therapeutics Corporation UTHR's shares have shed more than 28% year-to-date, making its valuation attractive, according to Credit Suisse. 

The Analyst

Martin Auster upgraded United Therapeutics from Neutral to Outperform and raised the price target from $98 to $101.

The Thesis

The recent weakness in United Therapeutics stock is attributable to concerns over generic competition for its pulmonary arterial hypertension drug Remodulin and shareholder base churn, Auster said in the Monday upgrade note. (See his track record here.) 

Yet the downside is limited due to multiple attributes that support near-term stabilization, the analyst said: 

• The potential for less aggressive generic uptake.
• A steady cash flow stream from Tyvaso/Orenitram, with potential for strong Tyvaso tail value.
• A potentially best-in-class profile for ralinepag.
• The potential for share buybacks.
• The potential for shareholder activism/M&A.

Ralinepag is a best-in-breed oral prostacyclin and could reverse an expected 2022 trough in the company's revenue and EPS, Auster said.

Credit Suisse expects a 2023 launch, with $750 million in peak sales.

Share buybacks made at United Therapeutics' current levels would be be value-creating if  they were accompanied by sound cost rationalization and asset prioritization, the analyst said. 

Given the depressed levels at which the shares are trading, Credit Suisse said it sees the company as an M&A target.

"Finally, we expect new value-oriented fundamental investors to be attracted to the story at current levels and believe there is potential for resulting greater pressure on mgmt./board for more efficient capital allocation/prioritization as a result," Auster said. 

The Price Action

United Therapeutics shares were trading higher by 4.86% at $81.85 at the time of publication Monday. 

Related Links:

The Week Ahead In Biotech: Pending Clinical Readouts In Focus

Attention Biotech Investors: Mark Your Calendar For These July PDUFA Dates