Executive Summary / Key Takeaways

• United Therapeutics continues its trajectory of double-digit revenue growth, driven by strong performance across its core treprostinil franchise (Tyvaso, Remodulin, Orenitram) and Unituxin, reflecting robust patient demand and effective commercial strategies.
• The company's differentiated drug-device technologies, particularly Tyvaso DPI and the Remunity pump, provide significant competitive advantages in patient convenience and efficacy, supporting market leadership despite increasing competition.
• Near-term growth is bolstered by strategic payer contracting and benefits from the IRA's Part D redesign, while the innovative pipeline, including Tyvaso in IPF/PPF (TETON studies) and oral ralinepag (ADVANCE OUTCOMES), represents substantial future revenue catalysts with key data expected in 2025-2026.
• United Therapeutics is uniquely positioned with its "Revolution" wave, advancing xenotransplantation (UKidney IND cleared, UHeart/UThymoKidney INDs planned) and bio-artificial organ alternatives (miroliver ELAP clinical trial underway), aiming to address massive unmet needs in organ failure.
• Despite facing litigation risks and increasing competition from both generics and novel branded therapies like Merck's Winrevair and potential Liquidia's Yutrepia, the company maintains a strong financial position, disciplined capital allocation, and confidence in its ability to sustain growth through innovation and execution.

A Biotech Story in Three Waves: From PAH Foundation to Organ Revolution

United Therapeutics Corporation, established in 1996 and transformed into a Delaware public benefit corporation in 2021, has built a formidable presence in the rare disease landscape, primarily focused on pulmonary arterial hypertension (PAH) and related conditions. Its mission extends beyond pharmaceuticals to pioneering technologies aimed at expanding the availability of transplantable organs. This ambitious vision is structured around what the company terms its "three waves of success": a strong foundation of approved, market-leading products; an innovation pipeline of next-generation therapies and new indications; and a revolutionary effort in manufactured organs and organ alternatives.

The company operates within a highly competitive biotechnology and pharmaceutical sector. In the PAH market, UTHR's treprostinil-based therapies compete with a range of established branded and generic drugs from major players like Johnson & Johnson (JNJ), Merck & Co. (MRK), and Pfizer Inc. (PFE), as well as niche competitors like Liquidia Corporation (LQDA). While larger competitors like JNJ and MRK command significant market share (JNJ estimated around 17.8% in PAH segments), UTHR has carved out a strong position, albeit with a smaller overall market share (estimated around 0.6%). The competitive intensity is increasing with the recent approval of novel therapies like Merck's Winrevair and the potential market entry of Liquidia's Yutrepia. Broader industry trends, such as increasing pricing pressure from payers (exacerbated by initiatives like the Inflation Reduction Act) and the high cost and regulatory hurdles associated with drug development, shape the operating environment.

United Therapeutics differentiates itself through a relentless focus on innovation, particularly in drug delivery technology and pioneering new therapeutic modalities like organ manufacturing. Its core competitive advantage lies in its proprietary drug-device combinations. The Tyvaso DPI system, for instance, offers significant convenience over traditional nebulized therapies, enabling faster administration, a tangible benefit for patients managing complex conditions. While specific quantifiable time savings are not detailed for all devices, the company emphasizes the ease of use and improved patient experience as key differentiators. Similarly, the Remunity pump for subcutaneous Remodulin is highlighted for its accuracy and ease of use compared to legacy systems, contributing to patient adherence and satisfaction. This technological edge supports UTHR's ability to maintain market share and command premium pricing despite generic competition for the underlying drug substance.

Beyond delivery systems, UTHR's R&D engine is actively pursuing advancements in small molecule therapies, gene therapy (Aurora-GT), and the groundbreaking field of organ manufacturing. The organ programs, while capital-intensive, represent a unique strategic pivot aimed at addressing the critical shortage of transplantable organs. This includes developing gene-edited pig organs for xenotransplantation (UKidney, UHeart, UThymoKidney) and bio-artificial organ alternatives using regenerative medicine and 3D bioprinting (miroliver ELAP, miroliver, mirokidney, ULobe, ULung). The company is investing significantly in dedicated pathogen-free (DPF) facilities to support clinical and eventually commercial-scale manufacturing, targeting an initial capacity of up to 125 organs per year from its clinical-scale facilities. These efforts, while high-risk, offer the potential for transformative impact and substantial long-term growth, positioning UTHR distinctly from traditional pharmaceutical competitors.

Performance Reflecting Strategic Execution and Technological Edge

United Therapeutics' financial performance in the first quarter of 2025 demonstrates the continued strength of its foundational business and the effectiveness of its strategic execution. Total revenues grew 17% year-over-year to $794.4 million, marking the eleventh consecutive quarter of double-digit revenue growth. This performance was primarily driven by robust sales across the company's treprostinil-based products:

• Tyvaso DPI: $302.5 million (+33% vs. Q1 2024), fueled by continued patient growth (including in PH-ILD) and increased commercial utilization following the implementation of the IRA's Part D benefit redesign. Higher gross-to-net deductions from strategic rebate agreements partially offset this growth.
• Nebulized Tyvaso: $163.8 million (+13% vs. Q1 2024), with growth primarily attributed to international sales timing.
• Remodulin: $138.2 million (+8% vs. Q1 2024), driven by increased quantities sold, particularly in the U.S.
• Orenitram: $120.7 million (+14% vs. Q1 2024), benefiting from increased quantities sold, a price increase, and higher commercial utilization due to the IRA, partially offset by increased gross-to-net deductions.
• Unituxin: $58.2 million (-0.3% vs. Q1 2024), showing stable performance.

The company's gross profit margin remains strong, reflecting the value of its proprietary products, though specific consolidated gross margin figures for Q1 2025 were not explicitly stated as a percentage. Cost of sales increased, primarily due to higher royalty expenses and product costs associated with growing Tyvaso DPI revenues.

Operating expenses saw notable increases. Research and development expenses rose significantly, driven by milestone payments for drug delivery device technologies, adjustments to contingent consideration for manufactured organ projects, and increased spending on these revolutionary programs. Selling, general, and administrative expenses also increased, primarily due to growth in personnel costs supporting the expanding business. Despite these investments, the company generated substantial operating income ($382.8 million in Q1 2025) and net income ($322.2 million).

Liquidity remains robust, with cash, cash equivalents, and marketable investments totaling $5,032.0 million as of March 31, 2025. Operating cash flow increased significantly, providing $461.2 million in the first quarter, primarily due to strong sales growth. Investing activities reflected substantial capital expenditures, including planned investments of approximately $750.0 million from Q2 2025 through 2027 for new facilities like the Tyvaso DPI manufacturing plant and clinical-scale DPF facilities. The company also entered into a new $2.5 billion revolving credit facility in April 2025, providing additional financial flexibility. This disciplined approach to capital allocation, balancing internal investment, strategic M&A (like the Miromatrix and IVIVA acquisitions), and returning capital to shareholders (like the recent $1 billion ASR), underscores management's confidence in funding future growth initiatives from existing resources and operating cash flow.

Pipeline Catalysts and Future Outlook

Management maintains a confident outlook, projecting continued double-digit revenue growth for the existing commercial portfolio in the near and midterm. This expectation is underpinned by the belief that their treprostinil franchise, particularly Tyvaso DPI, will continue to penetrate the PAH and PH-ILD markets, leveraging device advantages and expanding prescriber base. The IRA's impact on patient affordability is also seen as potentially offsetting increased rebate costs.

The "Innovation" wave holds significant catalysts for medium-term growth. Top-line data from the TETON 2 study of nebulized Tyvaso in IPF is expected in the second half of 2025, followed by TETON 1 data in the first half of 2026. Positive results could open up the large IPF market, potentially doubling the addressable patient population for Tyvaso products. The ADVANCE OUTCOMES study for oral ralinepag, a next-generation once-daily IP receptor agonist, is expected to complete enrollment in mid-2025 with clinical worsening events accrued through the end of 2025, and study completion anticipated in 2026. If successful, ralinepag could compete with or complement existing oral PAH therapies like J&J's Uptravi, which generated over $1.8 billion in global sales in 2024.

The "Revolution" wave is also progressing towards clinical milestones. The FDA cleared the IND for the UKidney combination phase 1/2/3 trial (EXPAND study) in ESRD patients in January 2025, with the first transplant planned for mid-2025. Positive feedback from the FDA also supports filing INDs for the UThymoKidney (EXTEND study) and UHeart (EXPRESS study) within the next year without additional baboon studies, accelerating the path to human trials for these xenotransplantation products. The miroliver ELAP phase 1 study, the first human trial of a bio-artificial organ alternative, is underway, with initial safety data expected in 2025. These programs, while not contributing to near-term revenue, represent the potential for revolutionary future growth by addressing massive unmet medical needs in organ failure.

Risks and Competitive Headwinds

Despite the positive momentum and pipeline potential, United Therapeutics faces significant risks. Competition in the PAH market is intense and increasing. While generic Remodulin has had limited impact on U.S. sales to date, the potential launch of Liquidia's Yutrepia, which has tentative FDA approval and a PDUFA date in May 2025, poses a direct competitive threat to the Tyvaso franchise, particularly Tyvaso DPI. Merck's Winrevair, approved in March 2024, also adds a new competitive dynamic, although management believes it is more likely to be used in combination with or sequentially to their treprostinil products rather than replacing them. Generic versions of nebulized Tyvaso and Orenitram are also anticipated in 2026 and 2027, respectively, which could impact future revenues.

Litigation remains a notable risk. The company is involved in ongoing patent and trade secret disputes with Liquidia, including a new lawsuit filed by Liquidia in April 2025 alleging infringement by Tyvaso DPI of a patent expiring in 2037. The Sandoz litigation regarding Remodulin infusion devices resulted in a judgment against UTHR, for which a liability has been accrued, but the outcome of appeals is uncertain and could result in higher or lower costs. Lawsuits related to patient assistance programs and 340B contract pharmacy policies also continue, carrying potential financial and reputational risks.

Operational risks include the complexity and capital intensity of scaling manufacturing, particularly for the new Tyvaso DPI facility and the DPF facilities for organ manufacturing. Reliance on third-party manufacturers and suppliers, along with potential supply chain disruptions, could impact product availability. The success of the innovative and revolutionary pipeline programs is inherently uncertain and dependent on positive clinical trial outcomes and regulatory approvals. Finally, as a PBC, the company's directors must balance shareholder interests with broader stakeholder and public benefit considerations, which could influence strategic decisions and potentially lead to increased litigation risk.

Conclusion

United Therapeutics presents a compelling investment narrative characterized by strong current performance, a promising pipeline, and a bold, long-term vision. The company's foundational business, driven by its differentiated treprostinil franchise and supported by effective commercial execution and device technology, continues to deliver robust double-digit revenue growth. This financial strength provides the resources to invest heavily in its innovative pipeline, with potential blockbuster opportunities in IPF and PAH expected to materialize in the coming years, and its revolutionary organ manufacturing programs, which aim to address profound unmet medical needs in organ failure.

While the competitive landscape is intensifying and litigation risks persist, management's confidence in the durability of its core business and the potential of its pipeline, coupled with a disciplined approach to capital allocation, underpins the investment thesis. The successful execution of the TETON and ADVANCE OUTCOMES studies, alongside progress in bringing xenotransplantation and bio-artificial organs into the clinic, are critical factors for future value creation. For investors seeking exposure to a biotech company with proven commercial success, significant near-to-medium term catalysts, and a truly transformative long-term vision, United Therapeutics offers a unique and potentially rewarding opportunity, provided the inherent risks of drug development and pioneering new technologies are carefully considered.