United Therapeutics shares dropped on new drug delay
NEW YORK, April 16 (Reuters) - Shares in drug developer United Therapeutics Inc. (NasdaqNM:UTHR - news) tumbled 19 percent on Monday amid disappointment among investors over a delay in the company's new drug application with U.S. regulators.
The Silver Spring, Md.-based biotech company said on Thursday after the market closed it had agreed with the U.S. Food and Drug Administration (FDA) to delay the decision on Remodulin, a drug to treat pulmonary arterial hypertension, by up to 90 days so that it could submit additional data in support of its application.
Shares of United Therapeutics dropped $3.35, or 22.48 percent, to $11.55 on the Nasdaq. The stock this year has lost some 20 percent.
``This is a continuation of disappointment for the company's new drugs,'' said Gideon Bernstein, a portfolio manager at the Keller Group who covers the healthcare industry and oversees $1 billion in assets.
The second drug the firm has in the pipeline is Beraprost, a drug to treat peripheral vascular disease that has also been under review in Europe for approval for over 2 years now, said Bernstein.
``The company's current revenues are insignificant and without any big product launches, it could burn through existing cash in the next few years,'' said Bernstein, adding that investors should be ``extremely careful'' because the FDA could reject the new drug completely.
The company said in December it expected 2001 revenues of $10 million to $20 million if the FDA approves its hypertension drug and $75 million to $100 million in 2002 if both U.S. and European approvals are obtained.
It now said the delay would alter its previously stated revenues projections, which it would revise when the FDA makes a decision on the drug.
The hypertension drug was undergoing priority review, meaning that the FDA would have likely reached a decision on approval within six months rather than the normal 12 months. The company submitted its application in October.
``I would wait for the FDA's approval (of the new drug) if I want to buy the stock,'' said Bernstein. ``Between now and then, there wouldn't be any catalyst for the stock to move up.''
There are two kinds of risks that investors face when investing in biotech companies -- development and product risks, both of which investors would have to take with United Therapeutics, said Bernstein.
``The biggest risk is development risk because companies spend most money and time on development of a new drug,'' said Bernstein. ``And United Therapeutics is taking this risk right now. If the drug fails, its business will be threatened because it doesn't have revenues to back it up.''
Its product risk is Remodulin, which if approved, will have to face fierce competition with other new hypertension drugs, said Bernstein. For instance, Swiss drug maker Actelion produces a promising drug called Bosentan.
``If Bosentan is approved, this could potentially take market share or replace the need for Remodulin in first line therapy,'' said Bernstein. ``Therefore, the longer it takes to get Remodulin to the market, the lower the revenue potential for United Therapeutics.''
Pulmonary hypertension occurs when the blood vessels in the lungs narrow, forcing the heart to work harder to pump blood through the lungs. This increases stress on the heart and can cause heart failure.
