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United Therapeutics (UTHR) Up 0.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for United Therapeutics (UTHR - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is United Therapeutics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

United Therapeutics Q2 Earnings Flat Year Over Year

United Therapeutics reported adjusted earnings of $4.36 per share for the second quarter of 2018, flat year over year. Adjusted earnings excluded the impact of share-based compensation expenses.

Including share-based compensation expenses, earnings came in at $3.98 per share versus a loss of $1.25 per share in the year-ago quarter. The Zacks Consensus Estimate was pegged at $3.36 per share.

Revenues for the reported quarter were $444.5 million, beating the Zacks Consensus Estimate of $349 million. Revenues were also flat year over year. Sales, however, increased 14.2% sequentially due to consistent historical distributor purchasing patterns. United Therapeutics’ second-quarter revenues are usually higher than the first.

The Quarter in Detail

United Therapeutics markets four products for the treatment of PAH – Remodulin, Tyvaso, Adcirca and Orenitram.

Adcirca sales were $109.8 million, down 9% year over year, due to lower volumes, which partially offset price increases.

Orenitram sales amounted to $49.5 million in the quarter, up 8% year over year due to patient growth. Remodulin sales were $159.5 million, up 1% year over year due an increase in orders from U.S. distributors and a price increase taken in April, which offset lower sales in international markets. Tyvaso sales totaled $105.9 million, up 2% year over year due to price increases.

Adcirca experienced loss of exclusivity in May this year and generics were expected to enter the market and hurt the drug’s sales significantly. However, no Adcirca generic has been launched yet though a generic formulation is still expected to be launched this year. Remodulin lost exclusivity in June and generics are expected to be launched soon. However, on the call, management sounded confident that branded Remodulin revenues will continue to rise despite generic competition this year. This is due to their branded product’s established safety profile and supply chain reliability, their patient support services and highly differentiated benefits. Moreover, the settlement agreements with the four generic manufacturers do not cover the right to market the generic formulations of Remodulin in the next-generation drug delivery systems.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $19.8 million were up 23% year over year.

Research and development (R&D) expenses escalated 28% to $79.1 million due to higher costs to support the company’s pipeline of cardiopulmonary and cancer drugs and to develop its organ manufacturing projects.

Selling, general and administrative (SG&A) expenses declined 1% to $66.4 million.

Update on Merger with SteadyMed

In April, United Therapeutics announced a definitive merger agreement with SteadyMed. United Therapeutics will acquire SteadyMed for $216 million including contingent payments. On Jul 31, shareholders of SteadyMed voted to approve the merger. The transaction is expected to close in the third quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 30.24% due to these changes.

VGM Scores

Currently, United Therapeutics has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, United Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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