Mark Skousen has spent the past few days touting a stock that’s supposed to skyrocket TODAY — and your friendly neighborhood Gumshoe was busy lolling about over the weekend, so we’re just getting to it now.
And don’t worry, the stock is actually down a bit over the last week or so, so if there’s any “skyrocketing” to be done we haven’t missed it. So let’s dig in and find out what stock he’s teasing, shall we?
The headline pitch is that the company CEO is buying up stock, which is usually a very good sign … here’s how he puts it:
“The company’s founder (who is also the chairman and chief executive officer) is accumulating shares in a major way. Having embarked on an automatic purchase program — a Securities and Exchange Commission-approved method for an insider to accumulate a major stake by buying incrementally and regardless of price — she now owns 656,000 shares, an investment of more than $31.6 million. Last month, she bought half a million dollars of additional shares. Clearly, she likes the company’s business prospects and believes the shares are undervalued.”
And what does the company do? It sounds like they develop “orphan drugs,” which are treatments whose developers get special incentives from the FDA because they are aimed at ailments with a small number of afflicted people — drugs that might not get developed unless they got a special boost, because the market isn’t big enough to make the investment potentially profitable otherwise.
Here’s how Skousen puts it:
“This biotech firm specializes in developing products to address the unmet needs of patients with chronic illnesses. Its leading products help offset a potentially life-threatening, high-blood-pressure condition.
“It also has a number of products in mid and late stages of clearance for everything from neuroblastoma to metastatic brain cancer.
“While most drug companies seek to develop products for conditions that afflict a large percentage of the population, this company uses a different tack. It strives to develop products for smaller groups that don’t currently have effective treatments for their illnesses.
“That strategy keeps both margins and profits high. For example, this company strives for a minimum of 20% annual revenue growth. It has hit that target every year for nine years — and is on track for a tenth straight year of reaching that goal.”
Very well … and what’s the deal with the “sky rocket on February 13” bit?
“The company reports quarterly results on February 13. Given the fact that the owner just invested $500,000 more of her money in the stock, I expect the company to continue its long string of success. The kicker? Shares appear undervalued at just 12 times prospective earnings – an unbelievable deal for a biotech firm with steady 20%+ growth for nine years running.”
OK — so who is it?
Well, the Thinkolator is well-rested on this bright and shining Monday morning, so let’s rev ‘er up … fill that hopper with our clues, let it chew for a moment, and here comes our answer: This is United Therapeutics, which likes to call itself Unither (UTHR)
Unither is a fascinating story, as is the CEO and founder — Martin turned Martine Rothblatt, a former communications lawyer and satellite entrepreneur whose daughter suffered from Pulmonary Arterial Hypertension (PAH), and who started a research foundation and later a company, Unither, to research treatments for that disease (and others as well, now). Unither has shown very solid revenue growth and, in recent years, excellent profit growth, largely due to their PAH drugs — with most of the success due to a drug called Remodulin. She has also done a lot of new age-y, futurist, borderline wacko (but not necessarily harmful) stuff, most recently with the Terasem movement, with lots of chatter about downloading your consciousness to radically preserve human life. That doesn’t appear to have anything to do with the company, though I suppose having a charismatic CEO with an attention-getting story can be both boon and curse to a public company.
So why is the stock looking pretty cheap, at about 12 times next year’s earnings despite huge earnings growth this year? Not because Martine is a big nutty, but because Remodulin is going off patent in two years — so they need more drugs. They do have a pretty big pipeline with the most advanced compound being an oral version of Remodulin (it’s currently an injectable), but I have no idea what the real potential is of any of those drugs or what the timeline will be for development and/or potential approval by the FDA. There has been some at least partly bad news for Unither of late, too, with an application filed for a generic version of Remodulin already that’s trying to get around the patent, and a potential problem and possible recall of their inhalers for another drug.
And yes, today is a critical day — but it’s not because they announce earnings today, the quarterly call is actually tomorrow, Valentine’s Day (that’s your last public service announcement, fellas, go buy those flowers!) — but the call is before the market opens tomorrow morning, so yes, today is the last day of trading before they announce. I have no idea what the stock might do, it is up so far this year and is just slightly off of recent highs, but analysts are terrible at forecasting earnings for Unither — they’ve been off by more than 50% in every quarter this year, twice very badly underestimating earnings, and twice wildly overestimating them, so don’t put too much faith in that forward estimate that gives us a 2012 PE of 12. The trailing (“real”) PE is also quite reasonable at about 16, given the growth rate, but that all just serves to remind us that the company is not going to remain consistent forever — at some point in the next couple years (and maybe sooner), what will matter for the stock’s valuation is the big Remodulin expiration and potential generic competition, along with the development of compounds in their clinical pipeline.
And finally, to ensure that our match is correct: Yes, Martine Rothblatt has been buying stock and does currently own about 656,000 shares — but she has sold a lot of stock in the past as well. She went through a consistent selling period a year ago when the stock was in the $60-70 range, and then a period of buying late last year when it was in the low $40s. She still owns roughly 1% of the company, though the roughly $32 million in value of her shares doesn’t sound as impressive when you note that she also has exercised stock options in recent years of $15-20 million per year according to Morningstar and Yahoo Finance numbers. Doesn’t mean that the buying at $40-43 in December is meaningless, of course, just worth noting — over the years she has been “pumping it out” as well as “pumping it in” when it comes to the company she founded, and she’s probably gotten more attention for heavy insider selling over the years than for her insider buying.
So … do you want to own this? The last hobby horse that Skousen rode into the ground in the biotech space was very successful, that was his massive teaser campaign for Cubist Pharmaceuticals that went on for months as they won some patent decisions and developed a premium valuation (they’re now trading at 80X earnings, despite a new generic challenge of their own), so he has gone down a similar road with some success for investors before, that pick is up about 75% over the 14-15 months since he first teased it … whether or not he’s right this time, well, I have no idea. If you’re agog or anxious about UTHR, let us know with a comment below.
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