United Therapeutics Down 15% Following FDA’s Rejection of Oral Remodulin (UTHR)

After the close of trading yesterday, biopharmaceutical company United Therapeutics (NASDAQ: UTHR) disclosed that its New Drug Application for an oral version of its lung disorder drug, Remodulin, was rejected by the FDA citing an inability to demonstrate patient improvement in Phase III studies. With such negative news, traders had no second thought and went on a selling spree right from the opening of today’s trading session. The shares of United Therapeutics lost more than 14% in the first half hour of trading on a volume of more than 1.83 million shares.

The Maryland-based company is engaged in the development of therapeutic products for patients with chronic and life-threatening diseases. The company’s product line includes Remodulin, Tyvaso, and Adcirca for the treatment of pulmonary arterial hypertension (PAH). Remodulin, Tyvaso and Adcirca generate nearly $900 million in combined revenue per annum. The FDA had approved injectable Remodulin in 2002.

On December 2011, United Therapeutics filed a New Drug Application for the oral formulation of Remodulin, which is chemically known as treprostinil diethanolamine. Also in December 2011, Martine Rothblatt, CEO of United Therapeutics, invested $2.7 million in the company’s shares. The news instilled confidence in the market, thereby resulting in a rise in the share price to $48.76 on January 10. Two days later, an upgrade from The Street Ratings to “buy” from “hold” took United Therapeutics’ share price to $50.99 on February 6. By mid-March, United Therapeutics filed patent infringement lawsuit against Sandoz, Novartis (NYSE: NVS) generic unit, which is seeking approval for its generic version of Remodulin. The event was followed by a decline in the share price of United Therapeutics to $40.42 on April 18. A Seeking Alpha report published on June 5 recommending United Therapeutics and the news of the purchase of RTP buildings from GlaxoSmithkline (NYSE: GSK) by United Therapeutics on June 29 aided the share price to reach $52.00 by the first week of July 2012.

The fiscal 2012 second-quarter earnings beat the Zacks consensus estimate and lifted the share price of United Therapeutics to $56.78 by August 15. With a reiteration of the “outperform” rating from Zacks Equity Research on September 28, the share price touched $58.91 on October 2.

Two days prior, The Street published a report indicating the possibility of a FDA decision that might go against the United Therapeutics’ interests. The FDA letter to United Therapeutics questioned the clinical importance of the 6 Minute Walk Distance (6MWD) effect size shown in the FREEDOM-M study. The FDA also pointed out that it was unsure whether an additional clinical study could alter the impressions.

Commenting on the rejection, Martine Rothblatt, Chairman and CEO of United Therapeutics, stated, “We will continue using our best efforts to gain approval of oral treprostinil, and we will focus on doing so within the next four years.” The shares of United Therapeutics fell as much as 16% in extended trading yesterday.

United Therapeutics ended the day at $44.99 per share, down $8.29 or 15.6% on a volume of 4.48 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.