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United Therapeutics (UTHR) is setting up an interesting stock for 2024. There are a number of moving parts that can play out both bearish and bullish and understanding these potential levers is quite important. Before diving into next year, we should note that their most recent quarter was quite strong. The company beat on Tyvaso revenues, which was the first time that happened in about a year. It looks like a real beat as it was driven by increasing penetration in the PH-ILD market as well as increasing adoption of the DPI formulation of Tyvaso (as compared to the nebulized formation).

The sources of the growth this past quarter actually encapsulate the issues heading into 2024. The increasing use of the DPI formulation is great for this year but represents a massive risk next. The issue is legal and Liquidia (LQDA) has their own DPI formulation that can launch in 2024 (assuming they can continue their legal successes). I am not a lawyer and do not want to belabor the complicated set of cases as well as the Patent Review Board process, but the consensus odds are quite high that Liquidia ultimately prevails and can launch in 2024. While United Therapeutics is a well-established player, it seems like the Liquidia version has a larger therapeutic window and could be a strong competitor.

This is the bear thesis on Tyvaso and where the strength in the DPI version in 2023 is not quite as bullish longer term. Clearly, the dynamics in 2023 demonstrate a preference for the DPI version and if a better (arguably) version is hitting the market in 2024, then this growth could quite easily reverse. Obviously, there are still some moving parts in that United Therapeutics still needs to lose the legal cases and they could defend their market share better than expected but there are real risks and questions.

The growth in the PH-ILD market, however, is bullish as United Therapeutics is the only company with approval in this indication. Management noted that their penetration in this market is still only in the lower single digits, which implies significant room for growth. United Therapeutics is continuing to build the market for PH-ILD and there is little reason to believe that they will not be able to expand this opportunity the rest of this year into 2024 and beyond.

You can start to see the dilemma into 2024 and how Tyvaso sales could decline, remain the same, or grow. You will have growth coming from increasing penetration into the PH-ILD market while market share in PAH being taken by the Liquidia DPI formulation.  It is not clear heading into next year exactly how those two processes will ultimately net out in terms of Tyvaso revenues. In addition, the legal questions are not yet settled (even though the strong consensus is that United Therapeutics will lose) and so we need to pay attention to that process.

While we do not know how it will work out next year, we at least have a clear understanding of the levers of 2024 Tyvaso sales. The faster that United Therapeutics can increase penetration into PH-ILD market the more room that they have to protect the revenue growth from the entrance of the Liquidia competition. My base case is that the growth of PH-ILD will be enough to continue growth through 2024 as it will likely take time for Liquidia to gain traction, but a strong Liquidia launch in 2024 likely raise significant questions for long-term sales of the Tyvaso franchise. In other words, it probably does not require a reversal of revenue to raise longer-term questions as investors will be focused on the pace of the Liquidia launch and extrapolate from those data points and until we see these factors start to resolve themselves next year, it will likely be an overhang for United Therapeutics.

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