United Therapeutics Scores $45 Million To Develop Novel Virology Treatments

United Therapeutics Corp. gets a $45 million tranched grant from the U.S. National Institute of Allergy and Infectious Disease to develop broad-spectrum compounds against influenza and Dengue.

Maryland-based United Therapeutics Corp. today announced that its Unither Virology subsidiary inked a $45 million contract with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health. The contract covers development of a broad-spectrum antiviral drug based on a glycobiology antiviral platform.

NIAID will provide Unither Virology $45 million in total over five years. Approximately $10.6 million will be awarded to cover the first 3.5 years, or base period. The remaining $34.4 million will be awarded based on eight milestones. The company reports that this funding will lead to approximately 20 new positions being created at Unither Virology's headquarters in Silver Spring, MD, and additional jobs for subcontractors.

The NIH contract will have "no material impact on the stock at this point," according to ISI Group analyst Mark Schoenebaum. However, it does potentially give United Therapeutics an important new arrow in its drug development quiver.

A company spokesman, who preferred to remain anonymous, said the contract should bring a compound targeting dengue through preclinical studies and allow development of preclinical data for an influenza compound as well. That would give the company a strong toehold in antiviral development.

The deal surrounds Unither's proprietary iminosugar technology. These molecules inhibit chemical pathways in the host cell that are used by viruses for protein folding. According to the spokesman, "It's a novel mechanism and could be fairly broad acting." Because iminosugars affect the host cell, rather than the virus itself, it's possible that the risk of drug-resistance developing will be lessened. The company reports that in laboratory studies the iminosugars have shown activity against at least five different types of viruses.

These compounds were developed in collaboration with the Oxford Glycobiology Institute at the University of Oxford in the UK. The spokesman said that the virology subsidiary is a completely separate facility that specializes in anti-viral drug development.

"The overall objective for this partnership with NIH is to develop a safe and orally available broad-spectrum antiviral drug to treat viruses such as dengue and influenza," United Therapeutics Chairman and CEO Martine Rothblatt was quoted in a company press release.

Dengue is a mosquito-borne tropical disease that infects as many as 100 million people in the developing world each year. It is endemic in Puerto Rico and many areas that are popular tourist locations. It could become more common in the southern United States as temperatures vary. No vaccine for dengue exists, although Sanofi is in Phase III with a tetravalent vaccine (Also see "Vaccine Upstart Inviragen Aims to Capture Dengue Market" - Pink Sheet, 25 Jul, 2011.).

The glycobiology platform is the earliest stage project in United Therapeutics' portfolio, but this deal is further evidence that "the company has good relations with government agencies," says Joseph Schwartz, an analyst at Leerink Swann. "That's definitely a plus in this space."

United Therapeutics broadly targets conditions with high unmet need and its products treat a wide range of conditions including relatively rare cancers. It currently has three approved products and six programs in clinical trials: two are in Phase I, three in Phase II, and one (oral treprostinil) in Phase III. Treprostinil is already approved in injectable (Remodulin) and inhalable (Tyvaso) forms for pulmonary arterial hypertension (PAH) - a potentially fatal condition in which high blood pressure in the pulmonary arteries strains the heart - and those products bring in the majority of the company's revenues.

Phase III Frustrates

Introducing oral treprostinil would have been United Therapeutics' most immediate means of increasing revenue. Previous trials of the oral compound in PAH had shown conflicting results, then in August 2011 the drug failed to meet its primary endpoint in a third, large Phase III PAH trial, called FREEDOM-C2 (Also see "Despite Latest Oral Remodulin Phase III Flop, UTHR Says It Still Has Enough Data For FDA" - Pink Sheet, 24 Aug, 2011.). The company maintained that it had enough data to support a narrow monotherapy indication in the U.S. for oral treprostinil, despite the drug's Phase III failure in the combination treatment setting.

The trial evaluated the distance that patients could walk in six minutes. Patients who received the drug did indeed walk further, but the difference was not statistically significant, partly because patients on placebo did better than expected. Overall, the drug performed much more poorly than analysts had expected, and a number of them downgraded the company after those results were released.

But some, including Schwartz, aren't giving up on the drug just yet. The company is planning to submit for approval of oral treprostinil by the first half of 2012 as a monotherapy, based on the late phase trial (FREEDOM-M) that did meet its endpoints. "This company has a history of surprising approvals," says Schwartz. "The injectable and inhalable versions of that product were both approved based on scant evidence. And there is tremendous unmet need in this disease." He says treprostinil's market performance has also been better than expected.

Share Repurchase Announced To Shore Up Sagging Stock

The NIH grant was awarded just one day before the company announced a private offering of $210 million of convertible senior notes, with which it intends to repurchase approximately $212 million of its stock. According to a company press release, this move is part of a broader share repurchase program of up to $300 million worth of stock. "It's a shareholder friendly gesture that comes after this summer's disappointing news from their clinical trial," says Schwartz.

The move nudged United Therapeutics' stock upward as "investors rewarded the company for boosting earnings per share," says Gene Mack, an analyst at Mizuho Securities. The company was aiming to lift revenue from just over $600 million in 2010 to $750 million in 2011, but the failed Phase III trial for an oral version of the company's top-selling product had dragged the stock down and raised questions about that forecast.

- Malorye Allison ([email protected])