Biotech's shares decline 12 percent

Management change, drop in profits, drug setbacks slow United Therapeutics

August 02, 2006|By TRICIA BISHOP | TRICIA BISHOP,SUN REPORTER

Shares of United Therapeutics Corp. - one of the few profitable biotechnology companies in the state - fell nearly 12 percent yesterday after the drugmaker announced a management change and profit decline, along with setbacks for two drugs in clinical trials.

The stock closed down $6.91 to $52.40 in trading that was six times higher than usual on the Nasdaq stock market.

The Silver Spring company reported that revenue for the quarter ending June 30 increased 34 percent over the corresponding three months of 2005. Income fell 37 percent because of newly recorded charges, including an income tax charge of $6.2 million and an employee stock option expense of $3.5 million, the company said. Sales were $40.2 million, up from $30.1 million last year. Profit was $7.7 million, down from $12.2 million.

Fred T. Hadeed, the company's chief financial officer for the next eight days, said the increase in revenue came from multiple factors. They include customer stockpiling of its lead drug Remodulin, which treats a blood vessel disorder in the lungs, as well as a rise in the number of prescriptions written and filled.

Hadeed, who has held the CFO position since January 2000, is ceding the post to finance Vice President John Ferrari on Aug. 10. Hadeed will retain his position as executive vice president for business development.

During a conference call yesterday, Chief Executive Officer Martine Rothblatt offered no explanation for the move, though she said it was in keeping with United Therapeutics' philosophy of promoting from within.

"I'd really like to salute Fred for offering John Ferrari the opportunity to serve as chief financial officer," Rothblatt said, adding that Hadeed did a "superb" job.

In an interview, United Therapeutics spokesman Andrew Fisher said Hadeed was wearing many hats, and that paring his positions made sense.

"He's not leaving the company, he's still working here. ... It's definitely a net positive," Fisher said.

Less positive, however, was the progress in clinical trials for an inhaled and an oral version of Remodulin.

The company said it is behind schedule in trials for the inhaled treprostinil because clinics can't find enough patients to enroll: Competitors are taking them. To increase its odds of getting more participants, United Therapeutics has nearly tripled the number of clinics involved.

"We originally thought it was going to enroll like wildfire and 12 centers was all we need; obviously, we were proven wrong in that," Rothblatt said. "I'm really chagrined."

The oral UT-15 drug has also been held up. In early June, the company suspended trials of the drug after one tablet was shown to release the medicine faster than it was supposed to.

"We had a hiccup," said Chief Operating Officer Roger Jeffs, blaming the defect on a manufacturing problem. "We have sourced the cause, we have fixed the cause and, in fact today, we are re-manufacturing."

The company hopes to resume the trials in October, and plans to spend the meantime honing the details.

"It's not as if we had to spend four months sitting on our hands," Fisher said.

tricia.bishop@baltsun.com

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