United Therapeutics Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of drug maker United Therapeutics (NAS: UTHR) plunged 17% on Wednesday after its experimental orally administered lung drug failed in a late-stage clinical trial.

So what: Given how badly the results missed expectations, skepticism is naturally growing among investors over whether the drug will ultimately achieve regulatory approval. Wall Street had estimated that an oral version of treprostinal could potentially drive peak sales of about $750 million, higher than United Therapeutics' sales figure from all of last year, so it's no surprise that the shares are crashing as Mr. Market significantly lowers his growth expectations.

Now what: I'd look into this drop as possible buying opportunity. Given oral treprostinal's success in another trial and the fact that it is already approved in injectable and inhalable forms, management remains upbeat about the drug's prospects. While the chances of approval in late 2012 to early 2013 are certainly lower after today's news, United Therapeutics' stock price -- down 40% over the past three months alone and currently sporting a forward P/E of 12 -- might actually be safer after today's plunge.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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