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United Therapeutics foresees solid growth

Competition looms for Silver Spring drugmaker

Friday, Dec. 9, 2005

Click here to enlarge this photo Gazette file photo Revenues at pharmaceutical company United Therapeutics Inc. of Silver Spring jumped 65 percent and net income leapt 152 percent for the third quarter of 2005, compared with same quarter in 2004.

Following a full year of expanded sales of its lead product, Remodulin, revenues jumped 65 percent and net income leapt 152 percent for the third quarter of 2005, compared with same quarter in 2004.

Remodulin treats pulmonary arterial hypertension, a life-threatening disease affecting about 50,000 people in North America and Europe.

United Therapeutic shares closed late Wednesday above $71, after beginning the year at $43. Shares sold for $20 in January 2004.

But Navdeep Jaikaria, senior analyst with Rodman and Renshaw in New York, said competing treatments from other companies are now entering the market and may soon limit United Therapeutics’ recent surge in profits, after ‘‘certainly a good quarter,” he said.

CFO Fred Hadeed expects the recent success to continue, however.

‘‘Last year, the day before Thanksgiving, we received approval of FDA for use of Remodulin intravenously. And sales began on this use immediately,” Hadeed said.

In 2002, the U.S. Food and Drug Administration had approved use of Remodulin through subcutaneous injections, just under the skin. ‘‘Now, it is fair to say that Remodulin gets more use for both routes, intravenously and subcutaneously,” Hadeed said.

CEO Martine Rothblatt founded the company in 1996, largely on the hope of finding relief for her daughter’s breathing difficulties from the disease. That same year, the company licensed rights to develop Remodulin from its inventors at Glaxo Welcome and Pfizer.

There is no known cure for the disease, but Remodulin is widely used to relieve the symptoms.

This year, United Therapeutics secured approvals for use of Remodulin in 22 more countries, said Hadeed, bringing its total to nearly 30 nations, including most of the European Union, most of North America, Australia, Switzerland and Argentina.

Rodman and Renshaw recently downgraded its recommendation for United Therapeutics’ stock from ‘‘buy” to ‘‘neutral.”

‘‘We are concerned about intravenous use of Remodulin because there are many drugs now on the market now,” said Jaikaria, who has tracked the company for several years. He said physicians are telling him that an inhaled treatment for pulmonary arterial hypertension called Ventavis, made by CoTherix Inc. of San Francisco, ‘‘is doing quite well now.”

CoTherix reported sales of $8.4 million for Ventavis in the quarter ended Sept. 30, double the previous quarter’s sales. Overall, the company lost $6.2 million for the quarter.

Before United Therapeutics began marketing Remodulin, the treatment market was dominated by the drug Flolan, sold by the large British pharmaceutical firm GlaxoSmithKline. Both drugs are forms of prostacyclin, which helps relax blood vessels in the lungs.

‘‘In terms of convenience and safety alone we are now beating Flolan,” Hadeed said.

Remodulin is a synthetic form of prostacyclin that is stable in the blood for more than four hours, while Flolan is a natural formulation that is stable for only two minutes. Flolan must be administered continually, directly into an artery, through a catheter, and requires refrigeration.

Remodulin is delivered in a similar way, but does not need to be refrigerated. Also, Flolan is in a powder form that patients need to mix every day before use, while Remodulin is already mixed.

The inhaled Ventavis is also a synthetic form of prostacyclin. CoTherix’s Web site claims that it is ‘‘currently the only prostacyclin treatment that dilates the pulmonary vessels by inhalation.”

Unfazed by the emergence of Ventavis, Hadeed said an inhaled form of Remodulin is on its way to market.

‘‘We have commenced our first trial at 14 hospitals in the U.S. and Europe to enroll 150 patients in phase 2 and 3 trials,” he said, adding that ‘‘much of the safety testing is done.” The inhalant Remodulin has the same active ingredient as the injected form.

Aiming for still more patient convenience, United Therapeutics is also developing a pill form of Remodulin.

Jaikaria said an inhalable Remodulin would be positive for the company, and that for the next two years, while the new product is developed and marketed, stockholders should not sell.

Jennifer M. Chao, senior analyst for biotechnology at the Deutsche Bank, North American Equity Research in New York, anticipates United Therapeutics’ stock to rise following a presentation of a study of inhaled Remodulin by an independent firm at the American Heart Association Meeting last month in Dallas. The product is ‘‘is on track for potential top-line results in the second quarter ’06 timeframe,” Chao said.

United Therapeutics’ revenues grew to $33.0 million in the third quarter of 2005, compared with $20.0 million in the third quarter of 2004. Gross margins from sales were $29.6 million in the third quarter of 2005, up from $17.8 million a year ago.