United Therapeutics (Nasdaq: UTHR) is a very smart and innovative company. In addition to that, it’s also a very profitable company.

This combination of having an innovative mindset and also running a profitable business tends to create long-term investment opportunities.

Let’s dig in deeper, to learn more about United’s past and where it appears to be heading in its future.

Innovation in its DNA

United’s CEO Martine Rothblatt founded the company in order to save her daughter’s life. Jenesis was only seven years old when she was diagnosed with pulmonary arterial hypertension, which is excessively high blood pressure in the lungs caused by the constriction of arterial blood vessels. There was no medical cure for the disease and Jenesis was expected to live no more than three years after the diagnosis.

That led Rothblatt (who was also one of the original cofounders of Sirius Satellite Radio) to launch United in search of a treatment for the disease. She found one. Jenesis is now 34 years old and serves as United’s Inspirational Founder and Ambassador.

It’s a joyful story with a great outcome. After winning FDA approval in 2002, United then brought its PAH-treating drug Remodulin (treprostinil) to market to treat the nearly 1,000 diagnoses of PAH in America each year. Remodulin has no competition and did $50 million in sales during its very first year of being commercialized.

United went on to improve and reformulate the drug to improve its efficacy and to treat similar illnesses including interstitial lung disease (ILD), chronic obstructive pulmonary disease (COPD), idiopathic pulmonary fibrosis (IPF), and neuroblastoma.

Altogether, United has five FDA-approved and fully-commercialized drugs to treat these variations of PAH: Remodulin (approved for PAH; pumped injection), Adcirca (PAH; oral pill), Tyvaso (PAH+ILD; inhaled powder), Orenitram (PAH; extended-release tablets), and Unituxin (neuroblastoma; injection).

Even though there are now competitive options available, United’s products continue to grow at double-digit rates across the board.

Source: United Therapeutics Investor Presentation

It’s fantastic that United is addressing these previously unaddressed conditions. But it’s also important to realize that its drugs are therapeutics that treat the condition rather than serving as a true cure that permanently defeats it.

As such, it’s continually optimizing its existing drugs in order to improve their performance and efficacy. It’s conducting two TETON studies to reformulate Tyvaso in a way that would increase the amount of air that can be exhaled from an IPF patient’s lungs. It’s developing a new drug, Ralinepag, that would have better durability and would stay in the body longer to better treat PAH.

Just as any innovative biotech company should, it’s building upon what it’s learned and making its commercially-approved drugs even better.

Organ Delivery? How About Organ Creation?

But could a more permanent cure actually be possible? United believes that yes it could, but it would need to be in the forum of creating synthetic human organs.

To add context, last month I profiled TransMedics (Nasdaq: TMDX) and described how its organs-as-a-service logistics network was making it easier for transplant centers to procure organs from recently-deceased donors.

Yet United might have an even more efficient solution. Rather than finding and transporting organs from recently-deceased donors, it aims to synthetically grow human organs that would be immediately available on-demand for transplants or for critical support.

For example, its external liver assist product (ELAP) is a bio-artificially grown liver that would help patients suffering from acute liver failure to get their native liver fully-healed and functional again. Another is its ULobe lung, which would introduce external cells into a damaged lung to make it stronger and more functional.

Just as it did with variations of PAH, United is taking “four shots on goal” when it comes to human organ engineering:

1. Xenotransplantation – modifying the hearts and kidneys of other animals to be transplanted in humans
2. Regenerative medicine – building and reintroducing an external lung scaffold using allogeneic cells (from a donor who was not the patient)
3. 3D printing – artificially printing a human lung
4. Bioartificial assist – critical care support to heal a damaged liver back to a healthy state

Looking to the Future

United Therapeutics is an innovative company who focuses on rare diseases and then continually improves upon its drugs to optimize patient outcomes. It’s now using the profits generated by its drug business to fund four much-larger programs, which would develop and transplant synthetic organs directly into human patients.

We’ve now looked at where United has been in the past and where it wants to go in the future.

In Part 2 of my update early — which I’ll publish early next week — I’ll take a closer look at whether this innovative biotech company’s incredible profit margins and yet volatile valuation multiples will make for an attractive investment opportunity.

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