United Therapeutics' (UTHR) risk/reward looks "favorable" at current valuation ahead of a Q3 readout of Tyvaso in idiopathic pulmonary fibrosis, which UBS Securities sees as a key binary clinical catalyst.

The brokerage said in a Monday note that it expects Tyvaso to benefit from seasonal strength in Q2 and Q3 and raised its Q2 sales estimate to $478 million from $447 million, in line with consensus at $479 million.

UBS cited feedback from key opinion leader Dr. Hooman Poor, who sees a 50% chance Tyvaso will produce positive data in IPF. While the mechanism of action remains unclear, the same applies to Ofev, which generates over $3 billion in annual IPF sales, the firm said.

Tyvaso has Orphan Drug Designation in IPF, which would provide seven years of market exclusivity if approved, potentially by 2027.

UBS said Insmed's (INSM) competing drug, treprostinil palmitil inhalation powder, would need to demonstrate clinical superiority to enter the market within that exclusivity window, a high bar given regulatory precedent and the relatively modest convenience benefit.

Still, investor caution persists following TPIP's strong phase 2 data in pulmonary arterial hypertension, which could weigh on United Therapeutics even if Tyvaso succeeds in IPF, the note said.

The firm cut its price target on the stock to $385 from $410, citing elevated competitive risk, and trimmed its 2026 EPS estimate to $29.31 from $29.65.

Price: 100.42, Change: +0.93, Percent Change: +0.93