EUR 850.00 For Business Accounts Only

Morningstar | Lowering Narrow-Moat United Therapeutics' FVE on Increased Costs, Continued Generic Headwinds. See Updated Analyst Note from 01 May 2019

United Therapeutics reported first-quarter revenue of about $363 million, down about 7% from last year. The results were helped by volume and price increases, including Remodulin's first price increase in nearly a decade. Remodulin contributed $156 million, up 23% from last year. After some adjustments to our model, including United's first-quarter up-front payment of $800 million to Arena Pharmaceuticals for ralinepag and a lowered outlook for Adcirca and Tyvaso, we are lowering our fair value estimate to $117 per share from $127. Despite this year's price increases, we model total revenue declines through 2021 due to patent expirations and generic entry. However, United has made solid progress in fortifying its pipeline, and we think new product revenue will keep returns above its cost of capital, solidifying its narrow economic moat.

Tyvaso continues to contribute significantly to United's top line, with $104 million in revenue representing a 10% increase from last year, driven by both price and volume, and a single-digit decrease sequentially. Orenitram also benefited from price and volume, posting $58 million, up 12% from last year. Unituxin contributed $25 million in revenue, up 38% from last year, primarily driven by volume. Adcirca sales declined more rapidly than we had projected, with $20 million representing an 80% decrease from last year and over 50% decrease sequentially. We've lowered our outlook for Adcirca and expect continued declines following last year's generic entry.