United Therapeutics (UTHR) Down 8.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for United Therapeutics (UTHR). Shares have lost about 8.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is United Therapeutics due for a breakout? 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 drivers.

United Therapeutics Q4 Earnings & Sales Miss

United Therapeutics reported earnings of $1.20 per share for the fourth quarter of 2019, which declined 18.9% year over year. The Zacks Consensus Estimate was pegged at $2.47.

The abovementioned earnings include the impact of share-based compensation expenses, license-related fees, unrealized gains/losses on equity securities and other items. Excluding these items, adjusted earnings were $1.96 per share compared with $3.34 per share in the year-ago quarter.

Revenues for the reported quarter were $311.1 million, which missed the Zacks Consensus Estimate of $350 million. Revenues also fell 18.4% year over year.

In the quarter, sales of United Therapeutics’ PAH products, Remodulin, Tyvaso and Orenitram, were hurt by inventory destocking by one distributor.

Quarter in Detail

Adcirca sales were $27.8 million, down 33% year over year as generic competition resulted in lower volumes in the quarter. Orenitram sales amounted to $50.9 million in the reported quarter, up 3% year over year due to an increase in the number of patients being treated with the drug and price hikes, which partially offset the negative impact of the distributor adjustment. Tyvaso sales totaled $91.4 million, down 14% year over year. Remodulin sales were $107.4 million, down 32% year over year due to the distributor adjustment and unfavorable patient mix as some higher dosage patients switched to generic treprostinil. However, the company specified that despite generic availability, U.S. patient demand for Remodulin remains stable. Lower international sales also hurt Remodulin sales in the fourth quarter.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $33.6 million were up 39% year over year due to an increase in the number of vials sold and price increases.

Research and development (R&D) expenses were $109.6 million in the quarter, down 22% year over year as higher costs for pipeline development were offset by easy comparison with the fourth quarter of 2018, which included a one-time payment to MannKind under a licensing agreement. General and administrative expense rose 6% to $61.7 million in the quarter while sales and marketing costs went up by 10% to $18.6 million.

2019 Results

Full-year 2019 sales declined 11% to $1.44 billion, missing the Zacks Consensus Estimate of $1.49 billion. Adjusted earnings of $12.94 per share declined 15.8% year over year.

2020 Outlook

In 2020, United Therapeutics expects its revenues to grow above 2019 levels, primarily driven by expanded Orenitram label reflecting the FREEDOM-EV results and higher Remodulin revenues. United Therapeutics expects Remodulin U.S. sales growth in 2020 despite facing generic headwinds on continued new patient starts and patient growth following RemUnity launch

Pipeline Update

Along with the earnings release, United Therapeutics said it expects to launch ISR in 2021, delayed from the prior expectation of 2020.

Also, United Therapeutics’ Trevyent disposable treprostinil pump system is under review with the FDA. However, along with the earnings release, the company said that the FDA’s current action date of Apr 27, 2020 for Trevyent may be extended as the regulatory agency noticed some deficiencies in the NDA and asked for some information. Though the company has provided some information to address the deficiencies, it believes the action date may be extended or the FDA may issue a complete response letter if it is not satisfied with the company’s response.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, United Therapeutics has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second 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

United Therapeutics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.