UTHR--a real gem of a stock profiled in investors business daily
Date: 8/17/99
Author: Gloria Lau
Entrepreneur Martine Rothblatt is nothing if not persistent.
She founded four companies, three in the satellite telecommunications business. Combined, they have a market value of $7 billion.
But five years ago, her daughter Jenesis was diagnosed with a rare disease called primary pulmonary hypertension. Within months, Rothblatt endowed a foundation seeking cures for PPH and quit her satellite companies to run the nonprofit group.
A year later, she assembled an experienced drug development team and launched United Therapeutics Corp.
The small biotech company specializes in developing drugs to treat PPH, a disease that afflicts just 55,000 people in the U.S. and Europe.
Rothblatt started United Therapeutics because the only drug that works against her daughter's disease is Glaxo Wellcome PLC's Flolan. The trouble is Flolan is approved by the Food and Drug Administration only for severe PPH, not Jenesis' milder form.
A year's supply of Flolan costs $50,000. A bulky intravenous pump administers the drug to patients through a surgically implanted catheter. This means patients must remain in hospitals and incur those charges.
For most of the 2,700 severe PPH patients using Flolan, private insurers foot the bills.
The FDA also has not approved the drug for people with the related secondary pulmonary hypertension.
Patients with the latter strain usually get the disease after a battle with immune disorders like lupus. Such patients have to pay cash for treatment.
''An insurer doesn't have to pay for a drug if it's used off-label, experimental or not FDA approved,'' Rothblatt said. ''It's too expensive for most people to pay on their own.''
So United Therapeutics is reformulating the drug. It plans to seek FDA approval for mild, severe and secondary forms of pulmonary hypertension. This way, all PPH patients will be covered by their insurers.
United Therapeutics' UT-15 will be simpler to use than Flolan. Both are based on a compound called prostacyclin but come in different forms.
UT-15 is an adhesive patch that transmits the drug through the skin. Patients stick the patch to their bellies or thighs and attach it to a pager-size drug dispenser that shoots UT-15 by the billionth of a gram into the patch.
While Flolan patients are trapped behind hospital walls, UT-15 patients will be able to tuck the dispensers into their belts and go about their business.
Pulmonary hypertension begins when blood pressure in the arteries supplying the lungs becomes abnormally high, causing growing resistance to blood flow. The right side of the heart is forced to contract more vigorously, causing the muscle wall to enlarge. Eventually right-side heart failure can result.
Most patients are women in their 20s and 30s. Without treatment, most die within three years.
Their only alternative to Flolan is a lung transplant. But such a procedure costs $100,000, and donor lungs are hard to come by. An undetermined number of the patients contracted the disease after taking the once-popular diet drug combination phen-fen.
Flolan brings Glaxo $100 million in annual sales, negligible for the drug giant, which had $13.2 billion in 1998 sales. The drug is sold only in the U.S.
United Therapeutics has been testing UT-15 here and in Europe. This allows the company to seek approval and sell the drug on both sides of the Atlantic.
Analyst Kevin Tang of Deutsche Banc Alex. Brown predicts that UT-15 will retail for close to $50,000 for a year's supply and potentially bring in $250 million in annual sales.
Rothblatt plans to follow a similar plan for the other drugs in the pipeline. United Therapeutics doesn't want to invent new drugs. It takes existing compounds, like Flolan, and develops them into easier-to-use forms.
It's cheaper this way. Since Glaxo already has proved prostacyclin's safety and efficacy to the FDA, the agency let United Therapeutics skip two phases of drug testing and jump directly into final Phase III trials. This potentially has saved millions of dollars.
The company has tested UT-15 on 300 of a planned 500 patients. It will seek FDA and European approvals in late 2000 and hopes to begin selling the drug by 2001.
Its other major drug candidate, called Beraprost, is a pill form of prostacyclin. Beraprost will treat early-stage peripheral vascular disease, which occurs when the blood vessels in the arms and legs narrow and cause pain. In severe cases, gangrene develops, requiring amputation of the limp.
Toray Industries already sells Beraprost in Japan. Hoechst AG applied in January to sell it in Europe.
United Therapeutics will file with the FDA in 2001 and hopes to begin selling the drug in late 2002. Then it will seek FDA clearance to sell it to patients with mild PPD.
Like UT-15, Beraprost's annual sales could eventually reach $250 million, Tang says. About 125,000 patients could use the drug, which will likely cost $2,000 a year.
In the second quarter, United Therapeutics lost 53 cents a share on grant revenue of $53,750. That compares with a loss of 20 cents a year before on no revenue. Analysts expect losses of $2.51 a share this year and $2.27 in 2000.
The company's pipeline also includes a patch for osteoarthritis and an inhaled drug for chronic obstructive pulmonary disease, a cross between emphysema and chronic bronchitis.
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