In surprise reversal the FDA approves United's oral PAH drug Orenitram

Christmas has arrived early for United Therapeutics. The biotech ($UTHR) took most analysts completely by surprise with the news that the FDA had stamped an approval on Orenitram (treprostinil, or oral Remodulin) after twice snubbing its application for the pulmonary arterial hypertension drug.

"Recall that the FDA had rejected this drug TWICE before and, with NO ADDITIONAL DATA, $UTHR filed for a third time earlier this year," notes an excited Mark Schoenebaum at ISI, who also called the approval "one of the top 10 biggest upside surprises in the history of the biotech sector... Amazingly, the FDA approved the application. This was CLEARLY outside my base case expectation as well as the Street's."

Investors quickly took the hint and drove United's share price up by 14%.

Schoenebaum was also quick to qualify the excitement, noting that the FDA only provided a "small" approval--helping a portion of patients get some exercise--on data for a 6-minute walk test. But even a small amount of revenue, say $100 million, is a gift at this stage. And United has an ongoing study for the drug that could make it much, much more competitive in the field.

Joseph Schwartz at Leerink estimated peak sales at $250 million, but also added that for now much of that cash will come when doctors switch over patients currently on "subcutaneous, intravenous, or inhaled treprostinil."

Actelion ($ATLN) scored the big approval of the year for its next-gen PAH drug, Opsumit (macitentan), its successor to the franchise drug Tracleer. The Swiss company also has its own oral PAH drug in the pipeline, selexipag, which factors into the next wave of competition.

"This approval marks the first time that the FDA has approved an orally administered prostacyclin analogue for any disease--and our fifth approval from the FDA for treatment of PAH--supporting our mission of providing a wider choice of PAH therapies for physicians and patients," said Roger Jeffs, United Therapeutics' president and COO.

- here's the release