United Therapeutics Earnings: Solid Results In Line With Expectations; Shares Fairly Valued

United Therapeutics UTHR reported solid first-quarter results in line with our expectations, highlighted by revenue of $507 million, representing a 10% increase year over year. We maintain our fair value estimate of $213, no moat, stable moat trend, and Morningstar Uncertainty Rating of High. We view shares as fairly valued, currently trading in 3-star territory. We continue to forecast high-single-digit sales growth in 2023 and declining sales in the latter half of our 10-year forecast period due to pricing pressure, generic entry, and branded competition.

United’s no-moat rating is due to its concentration in pulmonary arterial hypertension, and many of its approved therapies will face competition over the next 10 years. The company largely relies on one active ingredient, treprostinil, which is used in three of its five marketed products (Remodulin, Tyvaso, and Orenitram) for the treatment of pulmonary arterial hypertension, or PAH. The company’s two other marketed drugs are Adcirca and Unituxin. United’s leading drug, Tyvaso, reported first-quarter sales of $238 million, accounting for 47% of total sales.

Remodulin and Adcirca have already seen generic entry, and there are no patents covering Unituxin. Management reached settlements in 2018 with generic manufacturers to delay the generic launches of Tyvaso and Orenitram until 2026 and 2027, respectively. We also expect branded competition to challenge United’s competitive position in PAH as J&J’s Uptravi has quickly gained share since it received FDA approval in 2015, and it reported sales exceeding $1.3 billion in 2022.

We assign United a stable trend as label expansions of its portfolio and the continued development of its pipeline should support the stabilization of its intangible assets. As the company continues to face sales declines in its key products, the risks of potential missteps in clinical trials or poor product launches becomes magnified. These factors contribute to our High Uncertainty Rating.