Why United Therapeutics May See Modest Revenue Growth in 2016



Modest revenue growth

Wall Street analysts expect United Therapeutics (UTHR) to report revenue of approximately $1.6 billion in 2016, which represents YoY (year-over-year) growth of approximately 8.7%. A decline in new patient starts for PAH (pulmonary arterial hypertension) drugs Remodulin and Tyvaso in 1Q16 has been a key driver of the modest revenue projections for 2016. This was mainly attributed to a warehousing effect, which means patients delayed their treatment as they waited for gentler oral therapies such as Uptravi and Orenitram.

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United Therapeutics is also expected to earn revenues of approximately $1.7 billion in 2017, which translates to YoY growth of about 6.1%. These estimates are based on the possibility of generic competition for leading PAH drugs Remodulin and Tyvaso from Teva Pharmaceuticals Industries (TEVA) and Sandoz, a subsidiary of Novartis (NVS).

Oral PAH drugs Adcirca and Orenitram may also witness revenue pressure due to Gilead Sciences’ (GILD) Letairis and Actelion Pharmaceuticals’ Uptravi. This pressure may affect United Therapeutics’ share price as well as that of the SPDR S&P MidCap 400 ETF (MDY). United Therapeutics makes up about 0.33% of MDY’s total portfolio holdings.

Orenitram’s prospects

On December 20, 2013, Orenitram was approved by the FDA to improve exercise capacity in WHO Group I PAH patients. On the other hand, on December 22, 2015, competitor drug Uptravi was approved to treat PAH patients and reduce the rate of hospitalizations and overall disease progression.

Orenitram is currently being tested for reducing mortality and morbidity rates in PAH patients. United Therapeutics expects to gain approval for expanding Orenitram’s label by 2018. However, due to stronger label and first-mover advantages, Uptravi may attract a significant portion of PAH patients. With physicians and patients reluctant to shift from established therapies, which have substantial real-time data, Orenitram may fail to displace Uptravi even if it manages to strengthen its label in 2018. Orenitram may have to introduce pricing cuts to compete with Uptravi, which may affect future revenues.


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