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United Therapeutics (UTHR) Up 2% 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 2% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

United Therapeutics Q3 Earnings & Sales Beat

United Therapeutics reported adjusted earnings of $3.98 per share for the third quarter of 2018, which beat the Zacks Consensus Estimate of $3.49. Earnings declined 15% year over year.
 
Adjusted earnings excluded the impact of share-based compensation expenses, an impairment charge related to investment in a privately-held company and some other items. Including these items, reported earnings came in at $2.42 per share, down 61% year over year.

Revenues for the reported quarter were $412.7 million, beating the Zacks Consensus Estimate of $372 million. Revenues declined 7% year over year.

The Quarter in Detail

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

Adcirca sales were $74.6 million, down 25% year over year as generic competition resulted in lower volumes in the quarter. Adcirca experienced loss of exclusivity in May this year and a generic formulation was launched by Mylan in August. A higher allowance for product returns offset a price increase by Lilly and also hurt Adcirca’s sales.

Orenitram sales amounted to $53.8 million in the quarter, up 2% year over year. Remodulin sales were $153.6 million, down 18% year over year due to lower sales in international markets, which offset higher U.S. sales. Tyvaso sales totaled $107.8 million, up 21% year over year on price increases and easy comparisons from the year-ago quarter.

Remodulin is also expected to face generic competition this year, which could reduce sales from these products. 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 the company’s branded product’s established safety profile and supply chain reliability, its 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 $22.9 million were up 35% year over year on an increase in the number of vials sold and a price increase.

Research and development (R&D) expenses escalated 50% to $92.8 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 rose 11.1% to $69.4 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, United Therapeutics has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, 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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