United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Okay. Welcome to the afternoon sessions of the second day of the BofA Virtual Vegas Health Care Conference. I'm Geoff Meacham, I'm the senior biopharma analyst here at BofA. I have also Jason Zemansky from my team on as well. And we're really excited to have United Therapeutics present today with slides. And speaking on behalf of United, we have James Edgemond, the CFO. James, are you there?

I am, Geoff. Thank you for the introduction. I'd like to thank you, yes. And I'd like to thank you and Jason and BofA Securities for the opportunity to present United Therapeutics at your Virtual Health Care Conference this afternoon. Good afternoon, everyone, and thank you for listening to our webcast presentation. I'm joined today on this webcast by my colleague, Mr. Dewey Steadman, United Therapeutics Head of Investor Relations. We've organized our presentation today into 3 sections, which consists of an overview of United Therapeutics, a review of our markets and markets to market opportunities and an update on our product pipeline. Let's turn to Slide 2. And turning to Slide 2. I -- I'm sorry, I'm in control. So turning to Slide 2, let's start the presentation by reviewing our safe harbor statement and let everybody know that I will be providing some forward-looking information and non-GAAP financial information that is caveated with the statements presented on this slide. Let's turn to Slide 3 and the first section of our presentation to provide an overview of United Therapeutics. So turning to Slide 4. For those of you who are new to United Therapeutics, we are focused on our patients to deliver long-term revenue growth for our shareholders. We are currently working in 3 core areas that include lung disease; second, oncology; and third, organ manufacturing. And within each of these 3 core areas, we focus our efforts and our resources on opportunities for unmet medical needs by applying filters to: first; to develop the best possible medicines from our intellectual property; second, to conduct the most insightful clinical trials; and third, to take responsibility and, in fact, 100% responsibility for our entire chemistry, manufacturing and control supply chain, the GMP supply chain. Let's move to Slide 5. We currently have 4 core FDA-approved and marketed products. 3 of these FDA-approved products treat pulmonary arterial hypertension, or PAH, WHO Group I patients, and these products include Remodulin, Tyvaso and Orenitram. In addition, we also manufacture and market Unituxin, an oncology product for the treatment of pediatric patients with high-risk neuroblastoma. Let's transition to Slide 6. In addition to our commercial product portfolio, we are actively advancing a pipeline of over 20 research and development programs that includes new indications, formulations and delivery devices for our existing marketed products as well as new products to treat PAH, pulmonary hypertension, chronic fibrosing interstitial lung disease, what we refer to as SSc-ILD, cancer as well as other conditions. We expect to launch at least 3 of these projects in the near term, and these 3 projects include: First; RemUnity, a small lightweight durable subcutaneous pump. Number two would be and assuming FDA approval, the launch of Tyvaso for a new indication, following the successful increased clinical trial results; and number three, the implantable system for Remodulin or the ISR. And I'll talk about each of these 3 in a few minutes within the presentation. Let's transition to Slide 7. And turning to Slide 7. Despite the launch of generics against branded Remodulin in early 2019, we've seen total treprostinil franchise revenues remain relatively stable, as illustrated and presented on this slide. Also, as we recently reported in our Q1 2020 financial results, we built on the momentum coming out of 2019 as we once again reached an all-time high number of patients using one of our treprostinil medicines. And in terms of COVID-19, our near-term prospects have become a little bit harder to predict, but our business remains strong, and we expect to be resilient over the long term. In fact, we think we can continue to grow total treprostinil franchise revenue over the long term. And let's transition to Remodulin to review some of those reasons why. So let's transition to Slide 8. We expect U.S. Remodulin revenues to keep growing, notwithstanding the introduction of generic Remodulin just about a year ago now. We see 4 reasons to support our belief for why U.S. Remodulin revenues will continue to grow over the long term. And these are provided on this slide, the first being an established safety profile and supply chain reliability, having treated thousands of PAH patients; number two is patient support, including our premixed programs for IV patients and training that we provide hospitals and specialty pharmaceutical distributors on how to administer Remodulin; number three, the historical precedents of physicians and payers providing limited pressure to switch existing -- to switch to existing lower-cost PAH alternatives following the entry of generic key treprostinil; and fourth and lastly, a highly differentiated product, multiple next-generation drug delivering systems that offer clear advantages in terms of enhanced safety, tolerability, convenience for our patients where I will further discuss in a few minutes. As we recently discussed and disclosed in our Q1 2020 financial results, our U.S. Remodulin business remained resilient in the face of generic competition. In Q1, new patient starts remain strong. Our active patients were at an all-time high, and Remodulin drug dispense, the patients grew year-over-year. Transitions from Remodulin to generic treprostinil continued to be negligible, primarily limited to dual eligible Medicare Medicaid patients we have mentioned on prior earnings calls. Also, as we have discussed on our quarterly earnings calls and in reference on this slide to supply chain reliability for our patients during COVID-19, we have an ample supply of our products. In order to ensure access to our medicines and in accordance with our long-standing inventory policy, we have sufficient inventory of finished treprostinil-based products, which include Remodulin, Tyvaso and Orenitram to supply the market for 2 years at current levels of demand. In addition, we manufacture our own treprostinil active pharmaceutical ingredient, or API, and have 3 years' worth of API on hand at any given time. These finished goods medicines as well as API supplies are all stored in our own warehouses within the United States, and our historical inventory management approach has been well received by the PAH community. Let's transition to Slide 9. And the second section of our outline that we're going to talk about, United Therapeutics' markets. So let's transition to Slide 10. Our 3 core approved PAH therapies, which are Remodulin, Tyvaso and Orenitram can be used to treat the 45,000-patient PAH market for which there are around currently a dozen approved products. And we've outlined this current PAH landscape on the left side of the slide. Another market opportunity is illustrated in the middle section under the heading New PAH Opportunities. Through both the increase and the PERFECT clinical studies, we're seeking to move into PH-ILD or interstitial lung disease and PH-COPD in these markets. They currently have no approved therapies, and we estimate that there are about 30,000 as well as 100,000 patients in PH-ILD and PH-COPD, respectively. Beyond the current PAH landscape and new opportunities, the results of the increased clinical study give us confidence into the disease-modifying potential beyond pulmonary hypertension, and we expect to launch the TETON study in early 2021 that can move UT into an approximately 100,000-patient market in the U.S. that currently has few effective therapies for this indication, and we outlined this in the third section on Slide 10 on the right-hand side under opportunities beyond PAH. Let's transition to Slide 11. On Slide 11, we outline how we expect our treprostinil franchise, again, Remodulin, Tyvaso and Orenitram will grow over the next 5 years. This will be accomplished through an innovative -- through the innovative work our Unitherians are undertaking in PH and non-PH areas, along with pump innovations for Remodulin, the treprostinil Technosphere device for Tyvaso and the recent FREEDOM-EV label expansion that we expect -- and we expect to move from around 7,500 patients on treprostinil therapy today to 25,000 or more patients within 5 years. Let's transition to Slide 12. Turning to Slide 12. We were excited to add to the FREEDOM-EV data to the Orenitram label late last year. The FREEDOM-EV study showed the key attributes, including a 61% reduction in the risk of disease progression and improvement in key measures of risk and a positive impact on survival at study closure. In addition, a retrospective database analysis of U.S. health care insurance claims, concluded that selexipag-related PAH costs are 67% higher for Orenitram. We believe the Orenitram value proposition is clear and distinct and that physicians are starting to better recognize this. And we're seeing traction in the prescribing community as detailed in our Q1 2020 earnings call. And we believe the new prescriptions for Orenitram have been motivated by these items as we hit at the end of Q1 our highest levels ever of patients on Orenitram. Let's transition to Slide 13, and I want to transition into our third section and review our product pipeline. So let's transition to Slide 14. We've already had a busy year so far in terms of pipeline products. With the positive results of the increased study of Tyvaso in PH-ILD as this study hit all primary and secondary endpoints. In addition, we received approval for RemUnity pharmacy fill, which was cleared by the FDA, and we still expect to launch the RemUnity device in July of this year. We also received a complete response letter in April for Trevyent from the FDA. We are committed to this program and currently evaluating the FDA's letter. And lastly, we're working with our partner Medtronic to bring the ISR to market in 2021. We do and continue to think the ISR could revolutionize the use of Remodulin by the PAH community. Let's transition now to Slide 15. At the end of February 2020, we announced with much excitement that the increased clinical study of Tyvaso met its primary and secondary endpoints and expanded the science of treprostinil into PH associated with ILD. This is the first pivotal clinical study to demonstrate a benefit in PH-ILD. And again, we estimate that around 30,000 patients with PH-ILD, and there are currently no approved therapies for this indication in WHO Group III. Turning to Slide 16. I want to outline the endpoints for the increased clinical trial. The primary endpoint, which was successfully achieved was an improvement of 6-minute-walk distance after 16 weeks of treatment. The secondary endpoint showed significant reductions in the cardiac biomarker, the NT-proBNP, timed to clinical -- first clinical worsening and a change in peak and trough 6-minute-walk distance. We are still on track to file the sNDA with the FDA by mid this year. In addition, we are looking forward to releasing the full results of the increased clinical trial and plan to do so through a virtual ATS presentation of increase with highlights that we currently anticipate around the end of June. And secondly, as well as in a major medical publication, which will dive deeper into the results, potentially including a major medical journal later this summer, and then we'll certainly keep you up-to-dated on those events. Let's transition to Slide 17. As outlined earlier, we expect long-term U.S. Remodulin revenue growth, supported by multiple next-generation drug delivery systems that offer clear advantages in terms of enhanced safety, tolerability and convenience. We estimate that approximately 30% to 40% of PAH patients refuse parenteral therapy like Remodulin, but we believe early starts on Remodulin are associated with potentially better long-term patient outcomes. And our next-generation drug delivery systems address current concerns with current parenteral delivery via -- by the IV and subcu roots and listed on Slide 17 are 4 pump platforms. The first being the implantable system for Remodulin, which is ease of use and reduces risk of blood stream infections, or BSIs, and it results in patients having to refill the pump once-monthly or even longer depending upon the flow rate. Number two, in the lower left corner being RemUnity. This is a subcutaneous pump that has been FDA-cleared, and as I mentioned previously, we're still targeting to launch this product in July. It is small, lightweight and durable and has disposable cartridges, and it uses flexible dosing via acoustic volume-sensing technology. And so this is a very revolutionary pump that we're excited to launch this July. The third one being Trevyent, which is a prefilled, preprogrammed infusion system that offers simplification for subcu delivery via a patch pump technology. And #4 is the next-generation ambulatory infusion pump with smartphone capability that we call RemoLife. Let's transition to Slide 18, and talk more about our next-generation clinical trials and technologies within our pipeline. Beyond our near-term programs, we have over a dozen medium- and long-term next-generation clinical trials and technologies that we are actively advancing. And these new indications, formulation and delivery devices for our existing products as well as new products to treat PAH, PH, SSc-ILD, cancer and other conditions that I talked about previously. We have organized our pipeline on this slide into 6 therapeutic platforms that are labeled across the top columns. And within each platform is our goal to address unmet medical needs with awe-inspiring clinical development and new and novel technology. We are closely monitoring the development of COVID-19 in the pandemic and have previously made the decision to pause enrollment in most of our ongoing clinical studies. However, patients already enrolled in our studies continue to receive study drug and complete necessary clinical evaluations as appropriate. Let's transition to Slide '19, where I want to highlight ralinepag. It is in our pipeline in the medium term, and it is an IP receptor agonist. We have 2 clinical studies on -- ongoing, one ongoing and one that we're about to enroll. The first one being the ADVANCE OUTCOMES clinical study, which is currently underway and is an event-driven study of ralinepag in PAH patients with a primary endpoint of time to first clinical worsening event. The second ralinepag study is called ADVANCE CAPACITY with primary endpoints in change of peak oxygen uptake via cardiopulmonary exercise test. And this study has not yet enrolled at this time due to COVID-19 and the pausing of our clinical trials. We believe ralinepag could revolutionize oral PAH therapy with a potential for a true once-a-day product. Let's transition to Slide 20. On Slide 20, we outline how we're transforming the marketplace to make more organs available for transplant. We're moving towards addressing the desperate need for transplantable organs. Currently, there are approximately 1 million people in the U.S. that have end-stage organ disease and that may need a heart, a kidney or a lung transplant, among other organs, representing a potential annual multibillion-dollar opportunity for United Therapeutics. Thus, we are concentrating some of our core long-term priorities on the creation of an unlimited supply of tolerable, transplantable organs for those who annually suffer from end-stage organ disease. We are approaching this goal through multiple parallel paths based upon the options that are currently available today and taking advantage of rapidly changing technology and science. Today, we are helping with EVLP. We're moving close to Xeno-Kidney in baboons and longer term, could see regenerative medicine as well as 3D-printed lungs. And let's turn to Slide 21, where we're closer than you may think. There have been 137 patients saved by our EVLP technology. We are close to baboon studies in Xeno-Kidney and moving further towards recellularization as well as 3D lung printing. By using these and other technologies, we ultimately plan to shift organ transplantation in the late 2020s from a paradigm of scarcity to a paradigm of abundance, in which organs can be constantly produced and made available to patients who need them. Let's transition to Slide 23. It's the closing slide. And in summary, we're focused on our patients by advancing our product pipeline to deliver long-term revenue growth to our shareholders: By, one, treating more of a growing population of PAH patients with Remodulin and with our novel infusion product than we lose to older technologies; number two, gaining approval for Tyvaso into new markets, including PH-ILD, PH-COPD, chronic fibrosing interstitial lung disease and also by expanding to all of Tyvaso's markets with novel inhalation technologies; number three, growing Orenitram, thanks to a much stronger new label and strong value proposition; and number four, a longer-term pipeline comprised of multiple NCEs, oncology initiatives and organ manufacturing products that can transform the treatment of several diseases and propel our business well beyond the growth that we can accomplish just with Remodulin, Tyvaso and Orenitram. All of this is made possible by our strong balance sheet and continued free cash flow generation, which support our ongoing commitment to investment in research and development. This, in turn, drives innovation as we continue to focus on our patients. So Dewey and I thank you for listening into our presentation today. And Geoff, I'll turn it back to you.

Okay. Thanks, James. Yes, we have time for just a few questions here. I guess one of the more common questions or the question that we're asking a lot of companies, James, is the COVID impact. You guys have talked about that already for 1Q, but I wanted to get a sense from you in terms of what sort of long term planning do you -- have you guys done? And what is your sense in terms of the risk of a wave 2? What sort of planning and operations need to be done, everything from telemedicine to sort of work from home and things of that nature? Obviously, it's probably the more topical question across health care.

Yes, Geoff, thanks for the question. So a couple of things I would highlight. So from a Unitherian, what we call our teams at United Therapeutics, the Unitherians transition extremely well from working in the office to being remote. And one of the reasons -- or there's many reasons, but one reason is, we wanted to make sure that our manufacturing and our distribution teams could continue to do what they do to serve our patients, while the rest of the Unitherians worked remotely. And I think that transition has gone very seamlessly. And I know that across the board, Unitherians seem to be busier now than they were a few months ago, just with the large volume of activity going on, and some of which I described in the presentation today. Secondly, for our patients, as I outlined in the presentation, we have a long-standing policy to make sure that we have sufficient inventory available for our PAH patients. And that includes 30-day supply at our distributors, 2 years of finished goods at our domestic warehouses as well as 3 years of active pharmaceutical ingredients. So we are continuing to replenish that as we distribute finished goods to our specialty pharmaceutical distributors. And so we will maintain, at least if we need to, 5 years' worth of product to be able to continue to serve our PAH patients, who it is an imperative for them to have no disruption in the administration of their therapies. Three, I would say, the strength of the balance sheet. As we entered COVID, the balance sheet is well-capitalized, and we have enough cash and investments, as I mentioned earlier, to continue the significant R&D efforts that are important to United Therapeutics and potentially these new indications that we're working towards. So from that perspective, we feel very comfortable in terms of the strength of the balance sheet and the liquidity that we have to continue. So I think holistically, the organization is well-positioned for a long time for this initial wave, if there was a second wave and beyond, to continue to ensure we go forward as an organization and really serve our patients that are critical for us. Okay.

Okay. That's helpful, James. And next question is just on ralinepag and wanted to maybe just get an update for you -- from you on the enrollment trajectory. I know in the past, you guys have given some updates, but probably when the trial enrollment has matured a little bit more. But maybe just help us with maybe the COVID impact on that as well as looking forward to the treatment paradigm, how do you see the potential profile stacking up versus other orals?

Yes. Thanks for that question. So as I outlined, there's 2 clinical trials, one ongoing. And one that is on the cusp of starting. We haven't provided at this point enrollment update for the one that's ongoing, but we will over time. The interesting thing about the clinical trials is this is a global -- these are going to be global clinical trials. So ADVANCE OUTCOMES is a larger trial, which is the time to first clinical worsening event, which was ongoing, actually is a global trial with patients in China. And as I mentioned, we paused the enrollment of new patients, but those patients that were in the trial that needed and continued to get ralinepag clinical trial material and drug, even during this pandemic are still able to get that. So the teams are working creatively and tirelessly to make sure those patients that are in the trial continue to get the drug that they need as a part of the clinical trial. And as I mentioned, ADVANCE CAPACITY, we're on the cusp and will be when we can safely return to clinical trials and release the pause and begin those again. With respect to how ralinepag would stack up long term, there are benefits to ralinepag, and we certainly saw those in the Phase II study. But long term, we think that once-a-day dosing -- so ralinepag, we anticipate would have once-a-day dosing and also have better efficacy than current therapies on the market. So we think it would be a best-in-class product. And that's why we are excited. One, to do the license agreement. Two, to really engage and get these trials going. And as an organization, across the board, we're committed to the success and the trials in terms of execution, when we can safely open them back up and really begin them.

Okay. That's helpful. With that, we're out of time. So James, thanks a lot for the presentation and the questions. And Dewey, thanks as well. Take care, guys, and enjoyed the dialogue.

Great. Thanks, Geoff. Thanks for inviting us again. We really enjoyed it.

Yes. Thank you. Have a great day.