Why United Therapeutics Corporation Stock Skyrocketed

United Therapeutics stock is among today's top gainers after it announces a favorable legal ruling regarding its best-selling drug, Remodulin.

Aug 29, 2014 at 5:08PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of United Therapeutics (NASDAQ:UTHR), a biopharmaceutical company that develops products to treat chronic and life-threatening diseases primarily in the cardiopulmonary field, surged 29% today after receiving a favorable legal decision regarding its lead drug, Remodulin.

So what: According to United Therapeutics' late afternoon press release, the U.S. District Court for the District of New Jersey issued a ruling in favor of United Therapeutics in its patent case against Novartis' (NYSE:NVS) generic drug subsidiary Sandoz International. Sandoz had been planning to bring a generic version of Remodulin, a drug that treats breathing problems in patients with pulmonary arterial hypertension, to market, as noted by its abbreviated new drug application filing in 2011. However, those plans have changed with this ruling that upheld United Therapeutics' exclusivity claims to Remodulin in the U.S. until October 2017.

Now what: The scope of the move higher makes sense from the standpoint of United Therapeutics' shareholders because Remodulin made up $138.2 million, or 43%, of its $322.8 million in sales during the second quarter. This was up 11.1% from the year-ago period. In other words, an unfavorable ruling could have removed about a third of United Therapeutics' revenue within a year, since generics often garner about 80% to 90% of eventual sales from innovator drugs.

The good news here is United Therapeutics is free and clear to continue selling its high-margin lead drug for another three years. On the flipside, investors, or those on the outside looking in and thinking about investing in United Therapeutics, should also realize that its largest drug is going to face generic competition in just over three years. Put plainly, if investors don't have confidence in United Therapeutics' pipeline or other existing products to make up for the eventual loss of exclusivity on Remodulin, then chasing the stock higher after today may not be the best idea.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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