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United Therapeutics (NASDAQ:UTHR) is already established as a profitable biotech company with five FDA approved drugs on the market. The company has strong, above-average, double-digit revenue and earnings growth which can drive the stock higher over the long term. The low valuation leaves plenty of room to the upside for the stock. United Therapeutics is likely to achieve growth from its existing FDA approved therapies while the pipeline provides the potential for additional future growth.
FDA Approved Drugs Plus Phase 3 Developments
United Therapeutics earns most of its revenue from the five commercialized FDA approved therapies that are on the market. UTHR believes that it can double revenues by 2025 by doubling the amount of patients using its products. Currently, UTHR is helping about 12,000 patients. United expects this to more than double to 25,000 patients by 2025.
United brought in $1.85 billion in revenue over the past 12 months. So, doubling that would give the company $3.7 billion by 2025. To accomplish that, UTHR would have to grow revenue at a 26% annual rate for three years. That would be quite an accomplishment. Even if the company falls short of that goal and achieves strong double-digit annual gains in revenue over the next 3 years, UTHR’s stock has the potential to perform well.
One of the company’s FDA approved drugs is Remodulin, a drug to diminish symptoms associated with exercise in patients with pulmonary arterial hypertension [PAH]. UTHR is experiencing strong referrals for this treatment. The strong referrals led the company to forecast to grow the number of patients using Remodulin into 2023 even in the face of generic competition. Adding to this growth is the relaunch of the Remunity pump for Remodulin injection. The pump is a discreet device that is only 2 inches in diameter and can fit on a belt or in a pocket. The Remunity pump allows patients to refill their own cartridges or have them refilled and shipped directly to them.
Another growth catalyst for UTHR is Tyvaso, which is currently approved for enhancing the exercise ability in PAH patients with interstitial lung disease. Tyvaso is also in a Phase 3 study as a treatment for idiopathic pulmonary fibrosis [IPF]. A Phase 2/3 study demonstrated that 4 months treatment with Tyvaso for IPF resulted in significant improvements in lung function. About 100,000 people are afflicted with this condition in the United States. So, this looks like a promising orphan drug for IPF patients.
Orenitram is another one of UTHR’s FDA approved drugs. Orenitram is a tablet form of treprostinil to enhance exercise capacity in PAH patients. The treprostinil drug market is expected to grow at a 4.5% annual pace to 2029. That bodes well for UTHR’s Remodulin, Tyvaso, and Orenitram since they are all a form of treprostinil.
Another one of United Therapeutics’ FDA approved drugs is Unituxin. Unituxin is a monoclonal antibody for treating high-risk neuroblastoma. The global neuroblastoma market is expected to grow at a pace of 3.4% annually to 2030. UTHR’s other FDA approved drug is Adcirca, an oral PDE-5 inhibitor to enhance exercise ability in PAH patients. The market for treating PAH is expected to grow at about 5.2% annually to 2030.
UTHR has a 2nd drug in a Phase 3 study with ralinepag. Ralinepag is an IP receptor agonist, once-a-day oral therapy for PAH. Phase 2 study results demonstrated that ralinepag significantly reduced PVR (pulse volume recording) compared with placebo. Serious adverse events occurred in 10% of ralinepag patients and 29% of placebo patients.
Organ Manufacturing – Long-Term Growth Potential
UTHR is in the preclinical stages of development for organ manufacturing. This technology uses computer software to make 3D prints of actual functioning organs. There are over 100,000 people on organ transplant lists. UTHR is working to change this situation for the better. UTHR has a mission to manufacture an unlimited supply of transplantable organs before the end of the decade.
Of course, it could take longer to develop this technology to be used for patient organ transplants. If UTHR is successful, this could be another source of growth for the long-term for the company.
Attractive Valuation
United Therapeutics is trading with an attractively low valuation with a forward PE of 14.6 and a PEG ratio of 1.11. This is lower than the Biotech industry’s forward PE of 28.7 and PEG of 1.25. UTHR is also trading below the S&P 500’s (SPY) forward PE of 17.67 and PEG of 1.53.
UTHR’s PEG ratio is based on the consensus expected earnings growth of 13% per year over the next 3 to 5 years. If UTHR achieves that rate of growth or anything close to it, the stock is likely to grow at an above-average pace.
High Profitability
UTHR’s FDA approved therapies are contributing to the company’s high profitability metrics. Here is a list of UTHR’s strong double-digit profitability metrics:
| Profitability Metric | UTHR | |
| ROE | 17% | |
| ROIC | 12% | |
| ROA | 12% | |
| Gross Margin | 93% | |
| EBITDA Margin | 55% | |
| Net Income Margin | 38% |
source: Seeking Alpha
These strong metrics help drive UTHR’s strong double-digit earnings growth. Earnings are expected to grow at about 18.5% in 2023.
United Therapeutics Long-Term Outlook
UTHR’s portfolio of FDA approved drugs are still in growing markets which can continue to drive strong growth for the company over the next several years. The 2 Phase 3 developments could lead to new sources of growth within the decade. The company’s 3D organ manufacturing developments has the potential to be a new source of revenue and earnings further out in the future – perhaps in the 2030s if things go well.
Given the reasonable valuation and strong expected growth, UTHR’s stock looks likely to outperform the broader market over the next few years. Since the company’s products are needed by patients regardless of the economic climate, the stock could hold up better than average during a recession.
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Image and article originally from seekingalpha.com. Read the original article here.