Stunning Victory for United Therapeutics

Every stock pick in my Road Runner portfolios is the product of careful research. That research paid off in a big way this week, as one of the stocks in my Value portfolio soared 28.5 percent in one day after winning a stunning victory in court.

United Therapeutics (NASDAQ: UTHR) is a biotechnology company focused on the development and commercialization of unique products to address the unmet medical needs of patients with chronic and life-threatening conditions. The stock jumped to a 52-week high after a federal court gave it a partial victory in a patent lawsuit involving one of its drugs.

A federal district court in New Jersey has ruled in its favor in the company’s case against Sandoz, Inc. regarding United Therapeutics’ Remodulin product.  

In his opinion, Judge Peter Sheridan ruled that U.S. Patent No. 6,765,117 is both valid and enforceable against Sandoz, Inc., and enjoined Sandoz from marketing its generic product until the expiration of that patent in October 2017. 

Judge Sheridan also ruled that U.S. Patent No. 7,999,007 expiring in 2029 is valid, but would not be infringed by Sandoz’ generic product. 

Sandoz filed an Abbreviated New Drug Application in December 2011 seeking to market a generic version of Remodulin, and challenged patents covering Remodulin as part of that application.  United Therapeutics filed the lawsuit that is the subject of this ruling shortly thereafter.

“We are pleased with the Court’s ruling today confirming the validity and enforceability of the ‘117 patent,” said United Therapeutics’ CEO Martine Rothblatt. “We have always emphasized our investment in scientific advances and the resulting intellectual property that allows us to bring our products to patients, and this decision is a validation of that emphasis.”

United Therapeutics is analyzing the Court’s opinion and assessing its next steps with respect to the ‘007 patent, which may include an appeal of the ruling to the U.S. Court of Appeals for the Federal Circuit.

The court victory was only the latest bit of good news for United Therapeutics. The company recently announced its financial results for the second quarter ended June 30, 2014.

“Our continued growth shows that our medicines are reaching increasing numbers of patients suffering from pulmonary arterial hypertension (PAH),” said Rothblatt.

“The commercial launch this quarter of our extended-release tablet called Orenitram harkens an opportunity to bring prostacyclin-based medicine to more PAH patients in the U.S. than ever before, by providing a less-invasive route of administration than our prostacyclin infusion therapy called Remodulin.”

Total revenues for the quarter ended June 30, 2014 were $322.8 million, up from $280.6 million for the quarter ended June 30, 2013. Net income for the quarter ended June 30, 2014 was $111.9 million or $2.35 per basic share, compared to $79.9 million or $1.60 per basic share for the same quarter in 2013. Gross margin from sales was $282.6 million for the quarter ended June 30, 2014, compared to $245.2 million for the same quarter last year. Earnings for the quarter ended June 30, 2014 were $122.4 million, compared to $125.1 million for the same quarter in 2013.

Smart stock picking is more important than ever, because we’ve reached the point in the bull market where you can’t just count on all equities to keep rising. I’m not saying we’re about to experience a severe downturn, but the S&P 500 has been rising pretty consistently for more than five years now, and not every company will survive the inevitable downdrafts.

The Institute for Supply Management said Tuesday its purchasing managers’ index—a compilation of readings on orders, production, employment, supplier deliveries and inventories—climbed to 59.0 in August, from 57.1 in July. Many analysts had expected this indicator to show up  in negative territory, but instead the latest reading rose to its best showing since March 2011.

So upcoming GDP numbers may be better than we’ve recently been expecting. But the Federal Reserve — not to mention the bond market itself —  have still given no clear signals about where we’re heading in terms of long-term interest rates. And autumn, for whatever reason, has historically been a cruel season for the stock market.

The stock market is still the place to be, but they have to be the right stocks — the kind you can find in my Road Runner portfolios!