United Therapeutics

United Therapeutics Corporation ( UTHR - Analyst Report ) performed above expectations in the first half of 2012 and is positioned to continue performing well through the remainder of the year. This Zacks #1 Rank (Strong Buy) biotechnology company is well-positioned to gain share in the pulmonary arterial hypertension (PAH) market. In addition, the stock is reasonably valued with a forward price-to-earnings (P/E) multiple of just 12.1.

Earnings Strength

United Therapeutics is expected to report its third-quarter financial results on October 25. The Zacks Consensus Estimate is at $1.24 per share with revenue of $227 million.

On July 26, the company reported second-quarter earnings of $1.43 per share, topping the Zacks Consensus Estimate by 27.7% and beating last year’s result by 20.2%.

Revenues jumped 22.8% year over year to $225.6 million and exceeded the Zacks Consensus Estimate of $213 million. The improvement was primarily due to the increased patients being prescribed Remodulin, Tyvaso and Adcirca. All three products target the PAH market.

United Therapeutics is well-positioned to gain share in the PAH market. Lead product, Remodulin, continues to look very strong in both the intravenous (IV) and subcutaneous (SC) forms. Remodulin sales should benefit from the approval of the IV formulation in Europe.

The company is working on developing Remodulin for the Japanese and Chinese markets, which would bring in incremental sales.

Upcoming Catalyst

United Therapeutics has a major catalyst coming up later this month. The company is seeking US approval for oral Remodulin for the treatment of PAH. A response on the approvability of oral Remodulin should be out by October 27, 2012. Approval would be a huge boost for the company.

Earnings Estimates on an Upswing

Over the last 90 days, the Zacks Consensus Estimate for 2012 increased 7.3% to $5.00 per share, suggesting year-over-year growth of 23.1%. Moreover, the Zacks Consensus Estimate for 2013 increased 5.9% to $5.23, implying year-over-year growth of 4.7%.

Reasonable Valuation

In addition to a low P/E multiple, United Therapeutics’ PEG ratio of just 0.90 indicates that the stock is reasonably valued given the expected long-term growth rate of 13.5%. A P/E ratio below 15.0 generally suggests value. The company’s P/B multiple of 3.00 is on par with the benchmark for a value stock and well below its peer group P/B multiple of 4.23.

The chart below shows that the share price has been generally tracking the company’s earnings performance. Given the increasing trend of the Zacks Consensus Estimate, the share price should continue increasing.

United Therapeutics focuses on the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases. The company's lead product is Remodulin, an injectable formulation of treprostinil, indicated for the treatment of PAH in patients with New York Heart Association (NYHA) Class II-IV symptoms.

Tyvaso is an inhaled version of treprostinil. An oral version of treprostinil (oral Remodulin) is currently under US Food and Drug Administration (FDA) review. The third product in the company’s PAH portfolio is Adcirca (tadalafil; sold by Eli Lilly (LLY) as Cialis for erectile dysfunction). United Therapeutics, which has a market cap of $2.9 billion, has some early stage candidates in its pipeline focused on the development of treatments for cancer and infectious diseases.

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