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United Therapeutics Slips on Q4 Earnings Report

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Shares of United Therapeutics’ continued slipping on the company’s fourth quarter results – shares were down 4.1% over two trading sessions since the earnings release.

The company reported a loss of 60 cents per share in the fourth quarter mainly due to higher stock-based compensation expense. Earnings in the year-ago quarter were $1.60 per share. Meanwhile, the Zacks Consensus Estimate for fourth quarter earnings was $1.69 per share. In addition to posting a loss, the company’s fourth quarter revenues also lagged expectations. Revenues, which increased 18.5% to $289.0 million, missed the Zacks Consensus Estimate of $292.0 million.

Full year earnings came in at $3.28 per share, well below the year-ago earnings of $5.71 per share. Revenues grew 21.9% to $1.117 billion, missing the Zacks Consensus Estimate of $1.120 billion.

The Quarter in Detail

Remodulin revenues increased 3.1% from the year-ago quarter to $119.9 million. Revenues, however, declined 9.4% sequentially.

United Therapeutics is working on introducing Remodulin in the Japanese and Chinese markets which would bring in incremental sales. While the company expects to launch Remodulin in China this year, Remodulin has been filed in Japan. Moreover, the company has an agreement with Medtronic, Inc. (MDT - Free Report) for the development of an implantable pump to deliver Remodulin.

Meanwhile, Tyvaso and Adcirca contributed $114.4 million (up 33%) and $52.0 million (up 36.3%), respectively, to fourth quarter revenues. Tyvaso revenues have been picking up consistently and are now close to Remodulin revenues. United Therapeutics has increased the size of its cardiopulmonary specialist force that promotes Remodulin and Tyvaso.

We note that United Therapeutics is facing a patent challenge for Remodulin injection from Sandoz, Novartis’ (NVS - Free Report) generic unit. United Therapeutics has filed a patent infringement lawsuit against Sandoz. The trial is scheduled to take place this spring.

R&D expenses for the fourth quarter increased 224.3% to $121.6 million mainly due to higher share-based compensation expense.

SG&A spending increased 277.3% from the year-ago quarter to $157.2 million due to higher share-based compensation costs.

Our Take

United Therapeutics’ fourth quarter results were soft with the company missing on revenues and recording significantly higher expenses. We expect investor focus to remain on the upcoming launch of Orenitram and the Sandoz litigation.

United Therapeutics is a Zacks Rank #3 (Hold) stock. Currently, biopharma companies like Auxilium Pharmaceuticals look well-positioned with a Zacks Rank #1 (Strong Buy).

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