United Therapeutics: Gold Star Performance as Second FDA Approval Confirmed

| About: United Therapeutics (UTHR)

If pharma companies had end of school awards before the summer holidays United Therapeutics (NASDAQ:UTHR) would be lining up to get a well deserved gold star for achieving its goal of bagging two US approvals in the space of just eight weeks. On Friday, the FDA granted approval to its inhaled pulmonary arterial hypertension (NYSE:PAH) drug Tyvaso.

This latest marketing authorisation comes hot on the heels of the regulator giving Adcirca the green light back in June. As previously pointed out by EP Vantage, while approval of Adcirca was a big positive, as the biggest growth driver at United Tyvaso's approval was the important event and the one that the market had been waiting for (One down and one to go in United’s approval quest, May 27, 2009). Friday, shares in United had risen by 12% to $95.59, their highest level since October 2008.

Additional requirements

But it was not all plain sailing. As a condition of approval United has had to agree to post marketing modifications to its inhalation device, to perform a usability study on the device and collect pharmokinetic data to show that the dosing using the modified device is similar to that of the old one.

Also in line with the FDA’s increased caution over inhaled products, United has also signed up to conduct a long-term study to look at possible toxicity risk to patients on the treatment. The deadline for completing the modifications to the device and collecting PK data are October 31, 2010, while the long-term study is expected to complete by December 15, 2013.

Despite the additional work that the group has to complete, what has pleased most observers is the fact that the group can go on marketing the drug while these details are being sorted out.

Market share

With its approval now in the bag, some analysts have started to speculate that the drug, a version of United’s Remodulin, could start to steal market share from Actelion’s (OTCPK:ALIOF) Ventavis, the only other approved inhaled PAH therapy in the US. Tyvaso is forecast to have sales of $258m by 2014, according to consensus forecasts from EvaluatePharma

Ventavis was launched in 2005 and last year had sales of $88m. While it is approved in a wider patient population including the more severely ill PAH patients, what might help Tyvaso eat a good chunk of Ventavis’ lunch is its more convenient dosing regimen of approximately four inhalations versus six to nine. Tyvaso also has a quicker onset of action.

All of this should leave Tyvaso in a good position to fulfill its potential as the biggest growth driver at the company over the next seven years. European approval could also come before the end of the fourth quarter, giving sales and the share price, which has risen by an impressive 48% since the beginning of the year, another boost. Friday, however, investors appeared to be taking profits, sending the shares down 4% in early trading to $92.13.

Takeover speculation

With its three approved pulmonary products and the potential of an oral formulation of its current best seller, Remodulin, reaching the market by late 2011 - if dosing issues are sorted out and phase III trials due at the end of 2010 are positive - it is natural that some in the market have started to speculate that United may be a potential takeout target for a large pharma company.

This may be true, however, United’s rather hefty looking current market cap of $2.53bn which makes its look very over valued in relation to the value of its all products at $1.29bn, according to EvaluatePharma’s NPV Analyzer, might be a little off putting.

What might encourage someone to take a punt is the impressive profit growth at the company, which is forecast to move into the black this year and also deliver a 52% rise in reported operating profits over the next seven years to $376m. Add to this the potential approval of oral Remodulin, which will widen even further the group’s reach in the PAH space, someone may be willing to take a chance.