United Therapeutics shares plunge on failed study

NEW YORK—Shares of United Therapeutics Corp. plunged Monday after the company said a new formulation of its hypertension drug Remodulin failed to meet its goal in a late-stage study.

The stock fell $30.31, or 32.9 percent, to $60.74 in afternoon trading. Earlier in the session shares fell to $56.29, their lowest point in more than a year.

Remodulin is already sold as an injectable treatment, and the Food and Drug Administration is reviewing an application for an inhaled version. The oral-version study, called Freedom-C, involves 354 patients with chronic pulmonary arterial hypertension, a condition that can lead to heart failure.

A preliminary analysis of the study shows 14 percent of the patients dropped out of the study because of adverse events and 19 percent were unable to handle more than the smallest dose of the drug, which proved ineffective. But, the company said, the drug was increasingly effective for patients taking higher doses.

Doses of Remodulin were given in combination with one of two other current treatments.

"The issue with oral prostacyclins remains, at doses at which they work, they are intolerable, and at lower doses where tolerability is manageable, insufficient efficacy is seen," Piper Jaffray analyst Andrew S. Fein said in a note to investors.

He reaffirmed a "Sell" rating on the stock and has low expectations for the success on another late-stage study, called Freedom-M, which tests oral Remodulin as a stand-along treatment.

In a statement, the company said it will continue the program for the oral version of the drug, which includes Freedom-M, with results expected by March. It plans to enroll patients in another study, called Freedom-DR, shortly.

"While we are disappointed we did not achieve a statistically significant result for the primary endpoint, we believe the results fully support the continued development of oral (Remodulin), especially when the treatment effect is evaluated based on the dose achieved in the Freedom-C study," Chief Operating Officer Roger Jeffs said in a statement.

Meanwhile, Oppenheimer & Co. analyst Bret Holley reaffirmed an "Outperform" rating on the stock, saying the study results do not signal the end of the program and he expects positive results from the Freedom-M study. Calling the sell-off an overreaction, he said disappointment should be somewhat offset by a licensing deal with Eli Lilly & Co., also announced early Monday.

United Therapeutics said it is licensing rights to sell Eli Lilly's erectile dysfunction drug Cialis as a high-blood-pressure treatment in the U.S. The FDA is currently reviewing that application.

Elsewhere, Rodman & Renshaw analyst Thomas E. Shrader also reaffirmed a "Outperform" rating, saying he never factored in the success of oral Remodulin with the company's value.

"We have never expected the incremental benefit from an oral formulation to be substantial, and thus do not expect these data to impact our fundamental investment thesis for the company," he said in a note to investors.

The current growth rate of about 39 percent for Remodulin sales could be sustainable for years, he said, even without new formulations.