United Therapeutics Corporation (NADSAQ:UTHR) announced after hours on Tuesday that it’s application for an oral formulation of Remodulin (treprostinil) received a Complete Response Letter (CRL) from the FDA. Treprostinil is a treatment for pulmonary arterial hypertension (PAH) that is currently available in subcutaneous, intravenous, and inhaled forms. The oral formulation that UTHR is pursuing is an extended release tablet, and would significantly improve the drug’s adoption – and revenues – through ease-of-use. Additionally, the threat of generics for current Remodulin formulations, potentially in the next couple of years, puts more emphasis on the need for the company to obtain an approval of the oral form. Unfortunately, the FDA questioned the utility of oral Remodulin’s efficacy when it turned down the application. Among other reasons, the FDA cited the drug’s inability to demonstrate an improvement in time to clinical worsening in all three Phase III trials supporting the drug, and also questioned the inability of the treatment to demonstrate a statistically significant effect on 6 Minute Walk Distance in the FREEDOM-C studies.
The FDA specifically noted in its CRL that an additional clinical trial may not be sufficient to alter these impressions, but advised a fixed-dose design and more frequent dosing should the company decide to undertake another trial. UTHR management said they will convene with experts to discuss the best path forward, and reiterated that they are committed to gaining approval of oral Remodulin, but that it could take up to 4 years to do so. With the threat of generic Remodulin overshadowing the stock prior to the hope for an oral line extension, and current sales of the Remodulin franchise contributing more than half of revenues, the stock is vulnerable. There is little reason to remain long until long-term prospects are better understood. Shares should continue to trade down, and we would not be looking to buy UTHR until the generic risk is fully priced into the stock, which we calculate to be in the high $30 range.