This Biotech Won the Courtroom Fight and Still Trades Below Its Closest Peers

Yesterday’s hot inflation read put rate-hike jitters back on the menu, and AI stocks are wearing the bruises. Meanwhile, a profitable, cash-rich drugmaker that couldn’t care less about chip stocks just cleared its biggest legal headache and has two FDA reviews lined up behind it.

Today we break down why the market’s shrug looks like your opening, plus the tickers making noise right now.

United Therapeutics (NASDAQ: UTHR) recently traded around $543, and the week’s legal news could hardly have gone better. Its chief rival agreed to stop fighting, exit a key market, and pay up. The rival’s stock went to the moon. United’s slipped a fraction.

Read that again, because it’s backward. United makes treatments for pulmonary hypertension, a serious condition where blood pressure in the lungs runs dangerously high, and its inhaled drug Tyvaso anchors the whole business.

The settlement locks down a key piece of Tyvaso’s turf, two new drug applications sit with the FDA, and you can still buy the stock at a discount to the peers it usually gets lined up against.

The rival waved the white flag

United Therapeutics (NASDAQ: UTHR) settled all six of its lawsuits with Liquidia, covering patents, trade secrets, and antitrust claims. The fight was over Liquidia’s inhaled drug Yutrepia, a direct Tyvaso competitor.

A judge had already ruled that Yutrepia infringed United’s patent for pulmonary hypertension tied to interstitial lung disease (PH-ILD, for short). Liquidia looked at its odds on appeal and decided to fold instead.

The terms read as United wrote them. Liquidia pays $380.7 million in installments and can no longer sell Yutrepia for PH-ILD. It keeps selling for pulmonary arterial hypertension (PAH), which is why its shareholders threw a party.

They were bracing for something far worse. United’s shareholders got the better deal and somehow none of the confetti.

The scoreboard before the settlement

Here’s what makes the shrug even stranger. United walked into this week off a quarter that beat earnings expectations and kept profit margins above 40%. A business throwing off that kind of profit doesn’t usually trade like it has something to hide.

The next earnings report lands later this month, and it’ll be the first time management talks about PH-ILD without a lawsuit hovering over the call.

On top of that, fresh data is headed to CHEST, one of the biggest pulmonary medicine meetings of the year. You’ve got catalysts stacking up while the stock sits still.

PH-ILD is now Tyvaso’s backyard

Until this week, Tyvaso’s PH-ILD business carried an asterisk. Yutrepia was gunning for the same patients, and nobody could price how the legal fight would end.

That asterisk is gone. United now gets full capture of the PH-ILD market for inhaled treprostinil, and that’s the setup for earnings to get back to growing.

Think of it as the only grocery store in a neighborhood that just won the right to stay that way. Tyvaso no longer has to wrestle Yutrepia for every new PH-ILD prescription.

Exclusivity like that tends to show up as steadier sales and fatter margins, and today’s price gives it very little credit.

Getting paid to win

The settlement cash is a nice bonus. It works out to $9 a share heading to United, a company that was already sitting on billions in cash. The end of six lawsuits also means far less money flowing to lawyers, which quietly helps the bottom line every quarter.

Still, the check is the side dish. The main course is certainty. Markets hate open-ended legal fights because there’s no way to price them, so they slap a discount on the stock and wait.

That reason to wait just disappeared, and you’re early to the part where the discount fades.

Tyvaso is going after a much bigger lung disease

United filed with the FDA to expand nebulized Tyvaso into idiopathic pulmonary fibrosis (IPF), a scarring disease that slowly stiffens the lungs and reduces function.

The filing rides on Phase 3 results strong enough that the stock broke out when they landed. IPF patients don’t have many good options, so a win here opens a whole new market for a drug you’re already paying for.

And the fibrosis story doesn’t stop there. A separate trial in progressive pulmonary fibrosis is already fully enrolled. If Tyvaso keeps working in scarred lungs, you’re looking at a franchise that keeps finding new rooms in the same house.

A once-daily pill for PAH

The second filing is ralinepag, a once-daily oral drug for PAH that the FDA accepted for review over the summer. It’s built to extend United’s PAH franchise for years and gives doctors a reason to keep patients inside the United family, even with Yutrepia still competing in that market.

Here’s the fun part. The current valuation treats both of these filings like long shots.

Analysts’ average price target sits a fifth above where the stock trades, and fair value models land in a similar neighborhood. If either filing clears, you get a second leg higher that the market isn’t paying for today.

Cash, profits and very little drama

United throws off serious profits and carries billions in cash on a balance sheet that’s about as clean as they come. The stock also moves far less than the broader market.

That’s a lovely trait on a day when chip stocks are sliding into correction territory, and AI darlings are getting marked down.

The track record backs up the calm. The stock has nearly tripled over five years and has comfortably beaten the S&P 500 over the past year. This is a compounder that keeps getting priced like a one-trick pony.

The long-dated wildcard

United also runs an organ manufacturing program, working on xenotransplants and 3D-printed organs for patients who can’t get a transplant in time. Yes, really. It’s a long-horizon bet, and the market currently values it at next to nothing.

You don’t need it to work for this thesis to pay off. But if it does start hitting clinical milestones, it’s the kind of story that can rerate a stock on its own. Consider it a free lottery ticket stapled to a profitable business.

That $380.7 million settlement is going to make some upcoming results look prettier than the underlying business. The payments arrive in installments across this year and next, and they can pad reported earnings in the quarters they land.

Treat it as a one-time sweetener. It won’t repeat. The lasting value from this deal is PH-ILD exclusivity, which feeds Tyvaso sales year after year.

If you see a headline earnings jump tied to those payments, give it a polite nod, then go straight to Tyvaso revenue growth. That’s the number that tells you whether the thesis is working.

Yutrepia isn’t going anywhere in PAH. Liquidia just preannounced quarterly sales that beat expectations, and a rival with its legal worries behind it is going to come out swinging for share in that market.

The top line has been treading water as that competition chipped away, which is the main reason skeptics call this stock fully priced. If Tyvaso doesn’t reaccelerate now that PH-ILD is locked down, that argument gets louder.

Both FDA filings carry real regulatory risk, and a rejection or delay on IPF would sting the most since it’s the biggest new market in the pipeline.

Drug pricing pressure from Washington is the background hum that never fully goes away for specialty pharma.

United Therapeutics just won the war, got paid for it, and locked down a key market.

The stock trades in the high teens on trailing earnings, a clear discount to the peers it usually gets lined up against, while sitting on two FDA filings, a third fibrosis trial in motion, and a balance sheet most biotechs would kill for.

I’d buy it. The legal discount is coming out of the stock, the pipeline gives you more than one way to win, and the low-volatility profile makes it a sensible place to park money while the rest of the market argues about inflation and AI spending.

What would change my mind is Tyvaso growth stalling even with PH-ILD locked up, or an IPF rejection. Set a mental stop around $470.

Entry zone: $520 to $550. Add on weakness toward $500. Target: $640 to $690 over 9 to 15 months. Confidence: high.

Looking to buy? Start a position in the $520 to $550 range before the upcoming earnings report gives management its first clean shot at the PH-ILD story. Keep some dry powder in case the broader market throws another tantrum.

Already own it? Hold. On the next call, zero in on Tyvaso revenue and any color on PH-ILD now that the lawsuit is off the table. The CHEST data is your next pipeline checkpoint.

Main risk to respect: The IPF filing is the biggest swing factor in the pipeline. Size your position so a rejection would sting, not sink you.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any value stocks you want me to check out.

Best Regards,
—Noah Zelvis
Undervalued Edge