United Therapeutics Misses

United Therapeutics Corp. (UTHR: 56.01 -1.84 -3.18%) reported fourth quarter loss of 6 cents, well below the Zacks Consensus Estimate for a net profit of 28 cents. Full year net income came in at 35 cents. The company reported a loss of $1.73 per share in the fourth quarter of 2008. 

Even though revenues increased 43.5% to $108.9 million in the reported quarter, higher operating expenses led to the earnings miss. Full year revenues increased 31% to $369.8 million. The increase in revenues was primarily due to the continued increase in the number of patients being prescribed Remodulin and the launch of new products, Tyvaso and Adcirca. 

Net product sales, consisting of Remodulin, Tyvaso and Adcirca sales, increased 44.7% to $105.9 million in the fourth quarter. The company derives the majority of its product revenues from Remodulin, which posted sales of $86.4 million, up 18.2%. Full year Remodulin sales increased 22.9% to $331.6 million. 

Meanwhile, newly launched products, Tyvaso and Adcirca, contributed $15.2 million and $4.3 million, respectively to fourth quarter revenues. Both products should start contributing significantly to revenues from 2010 once they gain wider acceptance in the market. 

Other revenues, consisting of service sales and license fees, increased 13% to $3.1 million during the reported quarter. 

R&D expenses for the fourth quarter increased 37.9% to $41 million mainly due to an increase in non-cash, share-based compensation expenses. We expect R&D spend to remain robust as United Therapeutics continues to work on building its pipeline. 

United Therapeutics also recorded a huge increase in fourth quarter selling, general and administrative expenses, which came in at $56.6 million. The increase in SG&A spend was mainly due to an increase in share-based compensation expense and expenses incurred in connection with launch activities related to Adcirca and Tyvaso. 

We believe United Therapeutics is well-positioned to gain share in the pulmonary hypertension (PAH) market, which has players such as Gilead (GILD: 49.45 +0.80 +1.64%), Pfizer (PFE: 17.73 +0.06 +0.34%) and GlaxoSmithKline (GSK: 38.84 -0.52 -1.32%) among others. While its leading product Remodulin continues to look very strong, United Therapeutics now has a varied range of therapies available for the treatment of PAH with the recent approval of Adcirca and Tyvaso. 

Going forward, strong contributions from Remodulin and the recently launched Adcirca and Tyvaso should help the company achieve strong top-line growth in 2010 and beyond. We currently have a Neutral recommendation on United Therapeutics.