United Therapeutics Reports Solid Q4 Results

United Therapeutics UTHR reported solid fourth-quarter results in line with our expectations, highlighted by annual revenue over $1.9 billion, representing a 15% increase over 2021. We maintain our fair value estimate of $213 per share, no moat, stable trend, and high uncertainty ratings. We view shares as overvalued, currently trading in 2-star territory about 15% above our fair value estimate, as we continue to think the stock market is not fully incorporating the risk of generic competition that United Therapeutics faces over the next several 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 annual sales of $873 million, accounting for 45% of total sales in 2022. Tyvaso, Remodulin, and Orenitram combined accounted for nearly 88% of total sales. We continue to forecast high-single-digit sales growth in 2023 and declining sales in the latter half of our 10-year explicit forecast.

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. United’s no-moat rating is due to its concentration in pulmonary arterial hypertension, and many of its approved therapies are threatened by generic entry, pricing pressure, and branded competition. We expect United’s competitive position in PAH will also be challenged by branded competition, as Johnson & Johnson’s Uptravi has quickly gained share since it received FDA approval in 2015, and it reported sales exceeding $1.3 billion in 2022.