United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Hi. This is Eun Yang. I'm a biotech analyst here at Jefferies. This is my pleasure to host a fireside chat with James Edgemond, Chief Financial Officer of United Therapeutics at the Jefferies Virtual Healthcare Conference. So James, thanks for joining us today.

So this is going to be a Q&A. So I'll start with Tyvaso in pulmonary hypertension and interstitial lung disease. UTHR has mentioned previously there are about 30,000 U.S. patients who would be eligible for Tyvaso. How -- can you talk about how you derived that number, 30,000?

Yes, yes. Eun, thank you. And first of all, I want to thank you and Jefferies really for hosting United Therapeutics today at your virtual health care conference, including this fireside chat. And I look forward to catching up with you this morning. And I am joined today, Eun, by Dewey Steadman. Mr. Dewey Steadman is the UT's Head of Investor Relations, and he's joined the call and the conference today. So thank you again for hosting both of us. Now to your question on PH-ILD and the INCREASE clinical trial, well, let me briefly review the INCREASE clinical trial results first to help really frame really your question, which is really important. At the end of February, earlier this year, we announced with much excitement that the INCREASE clinical study of Tyvaso had met its primary as well as all of its secondary end points and therefore expanded the science of inhaled treprostinil into pulmonary hypertension associated with interstitial lung disease or what I will refer to as PH-ILD. The end points achieved, Eun, in the INCREASE clinical trial included the following. The primary end point was an improvement in 6-minute walk distance after 16 weeks of treatment. And the secondary end points included significant reductions in the cardiac biomarker NT-proBNP; time to first clinical worsening event; and a change in peak and trough 6-minute walk distance at week 12 and 15, respectively. And this is the first pivotal clinical trial of any therapy that demonstrated benefit in patients with PH associated with ILD. Now to your question, which is really the scope of the problem that we have been striving to address with the INCREASE clinical trial. The overall prevalence of patients diagnosed with ILD in the U.S. is about 230,000, and many ILD patients have PH that goes undiagnosed and their associated pulmonary hypertension ultimately will depend on the underlying etiology as well as the severity of lung disease. However, from our research as well as from published literature, it has been established that approximately 15% of ILD patients also have PH. And based upon this information, we estimate that there are approximately 30,000 patients with PH-ILD currently in the United States. And as we have stated, these patients in WHO Group 3 unfortunately have no approved therapies for this specific indication. One other point that I want to announce and I'm excited to announce today, that we've recently submitted the sNDA to the FDA for the INCREASE clinical trial results. And we'll provide more data on the review time line and the PDUFA date and its acceptance at some time in the future. But it was an important achievement by the team to get these INCREASE clinical trial results into the FDA, and we're excited to let you know that today.

That's great. So that's totally on track maybe this year. So how long do you think review time would be at the FDA?

Well, ultimately, Eun, it'll be dependent upon the FDA's acceptance and ultimate communication back to us. We hope to achieve a priority review or an accelerated review time line, and we'll certainly work with the FDA on that front. And again, once we hear back on the acceptance, we'll certainly provide an update going forward on the expectations.

That's great. And there's another product that you are developing, treprostinil dry powder inhalers. Can you compare and contrast your TreT versus Liquidia's product?

Sure. We can't really comment to really speculate on the status or time line of Liquidia's development efforts. But suffice to say we feel TreT really represents a great fit for UT. And just to expand on that a little bit, Eun, if I could. We believe the promise and the potential of TreT to deliver benefits for PH patients for a variety of reasons, and we have the strong belief, and I'll outline 4 reasons for that. MannKind's Technosphere dry powder formulation really results in powders that have particles within the consistent and narrow particle size range required for delivery deep into the lungs. Number two is we believe that the 2014 FDA approval for MannKind's Afrezza for insulin dry powder inhalation provides significant validation for the approvability of the TreT product given that TreT incorporates the same dry powder technology and excipient as Afrezza. And in addition, TreT incorporates the same Dreamboat device used in Afrezza. Thirdly, given MannKind's experience with commercial-scale production of Afrezza, we also believe commercial scalability of TreT is well understood, enabling UT to rapidly complete development and make TreT widely available for PAH patients once it is approved by the FDA. And lastly, with respect to MannKind's dry powder inhaler or DPI technology, as Dreamboat inhalers are small and more lightweight than the current Tyvaso nebulizer, the Dreamboat does not require electricity, and TreT should offer reduced administration times of only 2 to 3 minutes as compared to Tyvaso's approximately 20 minutes per session currently.

Great. And when do you -- there is some delay with COVID-19 for TreT clinical trial, but when do you expect to file for approval?

Yes. Thanks, Eun. It's a good question. So overall, we're working on a few things related to TreT, and those include stability tests; and 2 small trials, one, the BREEZE clinical trial which is a switching trial. All -- most of all of our clinical trials are certainly impacted by COVID. And these small trials, for example, the BREEZE clinical trial, is relatively small. And so when we're able to reengage and enroll patients into the clinical trials, we still expect to stay on track to complete all the activity for TreT and file towards the end of this year or early the following. So recognizing the stability in the small-scale clinical trials, we're still enthusiastic and still have plans to achieve our milestones towards the end of this year.

Great. For TreT, for potential expanded indications such as PH-ILD, do you need to do a small Phase III study similar to Phase III BREEZE in PAH?

Yes, good question. We're certainly interested in pursuing TreT for use in the potentially expanded patient populations of PH-ILD as well as PH-COPD, and we will be evaluating these opportunities and talking with the FDA later this year to really understand what information from the BREEZE study can support a filing and indicate a filing for this indication; and what additional information or studies, if any, may be required for the TreT technology into these expanded indications. And it's something that we're very focused on as well.

Great. And Remunity launch is coming up in July. So can you remind us the potential advantages of Remunity compared to Remodulin?

Definitely. Remunity is really going to be the first pump ever created specifically for the use in PAH. And we think Remunity will be well tailored to today's PAH patient, as it offers advances in microinfusion technology that we call are small, simple and safe. It's small in the sense that it's only 2 inches in diameter and weighs under 2 ounces. The Remunity pump is simple, as its prefilled Remodulin cassettes will be shipped by specialty distributor directly to the patient; and safe in the sense that it will have more than 20 automatic alarms and is also water resistant. So we really think the opportunity for Remunity will have a great benefit for PAH patients. And one question we get really is really with respect to pricing of Remodulin with respect to Remunity. And just to address that is that Remunity will administer Remodulin and pricing will be the same as other Remodulin applications if the patient remains on the same dose. And also with respect to the cost of the pumps, which is another question we do get, we expect the cost of the pumps to really be no greater than the existing pumps used to deliver subcutaneous Remodulin therapy. But we're still working on the final cost of the pumps and also the mechanics for reimbursement for Remunity pump as part of the launch preparation process. But again, that launch preparation is still on track, and we anticipate launching Remunity next month, in July of this year.

For Remodulin, in the first quarter conference call, you noted that transition to generic Remodulin remains negligible and also about 15% of those transition to generic actually having returned to Remodulin. So what was the main reason for switching back to Remodulin from generic?

Yes. Thank you, Eun. Well, we don't have any of the specific or exact data as to why patients have switched back from branded Remodulin. There was, however, a study that was completed by one of our specialty pharmaceutical distributors. They did this last year with a subset of patients that have transitioned back to branded Remodulin, and the study results cited a percentage of the transitions back had to do with tolerability as well as dosage adjustments that were needed by these patients.

I see. And in 2016, including some onetime charge, ex U.S. Remodulin sales accounted for about 20% of total sales. This year, it's [ around about ] 15% due to pricing pressure outside the U.S. When do you expect, ex U.S., pricing for Remodulin to stabilize?

Yes. Thank you, Eun. And as a matter of course and really historical practice, we don't issue product revenue guidance. However, as a little background, genericization in Europe has been increasing over the past several quarters, and we expect that trend to continue. Unlike in the U.S., in Europe, just an approval, not an actual product launch, of a generic formulation will trigger a price reduction. And so far, we've seen approvals in at least 17 EU countries with respect to generic products.

Moving on to another product ralinepag. So it's in Phase III. What's the key focus of differentiation of this product versus selexipag? Would that be safety from more favorable PK profiles, efficacy or both?

Sure. And let me just give a little background on ralinepag as well to frame the question. But ralinepag is really a promising IP receptor agonist. It is going -- undergoing Phase III studies for PAH. And we currently have 2 Phase III clinical trials, including the following. One is the advanced outcomes, which was started and is an event-driven study of ralinepag in PAH and PAH patients with a primary end point of time to first clinical worsening events. And the second study, which is called ADVANCE CAPACITY, has a primary end point of a change in peak oxygen uptake via cardiopulmonary exercise tests. And we believe ralinepag could really revolutionize oral PAH therapy and be a more attractive option for PAH patients, with potential benefits including better pharmacology. And these benefits include improved potency and efficacy, a longer half-life and a true once-a-day dosing as well as a safe -- as well as safety. We believe ralinepag, Eun, if approved by the FDA, has the potential to increase the number of patients treated with an IP receptor agonist and provide PAH patients with more treatment options and will also complement UT's existing suites of PAH therapies.

So you're going to be presenting Phase III INCREASE data for Tyvaso in PH-ILD at ATS virtual conference later this month. And around the same time, Acceleron's [ news around ] sotatercept for PAH data will be presented. So as a leader in PAH, can you give us your view on sotatercept?

Yes. Thank you, Eun. Like the rest of the PAH community, we haven't seen Acceleron's data yet either, and we're looking forward to the presentation later this month at the ATS virtual session. From what we understand, sotatercept was used in combination with other PAH agents. The evolution really of PAH therapy has allowed patients to live longer post diagnosis. And we're really onboard with any new developments that help PAH patients live longer, more fulfilling lives.

Okay. Another question is I think you mentioned early on COPD. So Tyvaso is also investigated for pulmonary hypertension in COPD patients. When you look at COPD patients, there are a lot of patients. We hear from officials that there will be like 1 million eligible patients. So assuming the studies are successful and eligible number of patient is close to 1 million in the U.S., how would you think about pricing for Tyvaso at that point?

Yes. Great question, Eun. And again, let me just give a little bit of background on the PERFECT study to really help frame your question as well. With the PERFECT clinical trial, which is a study of Tyvaso, as you mentioned, for use in patients with pulmonary hypertension associated with chronic obstructive pulmonary disease, which I'll refer to as PH-COPD, and along with the INCREASE clinical trial we just discussed a few minutes ago, really are 2 new exciting opportunities that UT is pursuing to move into WHO Group 3. And these are brand-new markets with potentially patients that currently have no really approved therapies. So there's no approved therapies or medicines for these patients. Just recall that the PERFECT clinical -- in the PERFECT clinical trial we're using Tyvaso, which is an inhaled version of treprostinil, to target the more ventilated areas of the lungs and to really minimize the risk of ventilation/perfusion mismatch or also known as V/Q mismatch. And what's important to remember here is that there has been a historical administration of systemic vasodilators, which have been tried already in numerous clinical trials, but that increases -- the systemic vasodilator increases perfusion to all areas of the lungs, which also includes existing damaged areas of the lungs with very poor ventilation. Thus, despite reported improvements in hemodynamic parameters, systemic vasodilators result in worsening gas exchange because of the increase in the V/Q mismatch. And based upon the positive results of the INCREASE clinical trial, we have additional confidence in the ultimate outcome of the PERFECT clinical study. Now as for the estimated number of patients, again, the scope of the problem for PH-COPD, the prevalence of diagnosed patients is certainly variable and depends ultimately on the severity of the disease. But we estimate that the number of eligible patients in the U.S. with PH-COPD to be approximately 100,000, and we estimate this figure from existing literature as well as our research that a smaller portion of the total COPD population presents with PH. As for pricing, one of your questions, we're not planning to price by specific indication. One last item, if I could, before we move on to the next question. But beyond the current PAH landscape and the new opportunities in PH, really, the positive results of the INCREASE clinical study give us confidence in the disease-modifying potential of Tyvaso. If you recall and as Martine has discussed, Tyvaso demonstrated a disease-modifying effect in certain INCREASE clinical trial patients with pulmonary fibrosis by improving their FVC or their forced vital capacity in just 8 weeks, and that was on top of already approved background therapies. So we're moving beyond PH, and we expect to launch the [ TETON ] clinical study in early 2021 that could move UT into another approximately 100,000-patient market that we are referring to as chronic fibrosis ILD, or [ CFILD ] as an acronym. And this indication, Eun, currently has very few effective therapies. And we expect to provide updates on this new [ TETON ] clinical study in the near future.

Great. So upon positive Phase III INCREASE trial, have you seen kind of like physicians' interest or uptake in Tyvaso usage? Or do you think we will need to wait until it gets on the label?

Yes. Good question, Eun. Really, doctors are free to prescribe Tyvaso for uses outside of approved labeling, but UT does not recommend or endorse such usage. And unfortunately, we don't capture data on physician prescriptions outside of PAH.

But do you know currently what percent of Tyvaso sales are coming from off label versus PAH?

No. Sorry, Eun. We don't really capture that information. So I don't have information to share with you.

Okay. So given that there are 30,000 eligible patients with PAH and ILD, once it's approved, what's the kind of a realistic target for capturing the percentage of the 30,000 patients in the U.S.? That's a pretty large market.

Oh, it's extremely large. And maybe a way to frame it, Eun, is this and using numbers we've kind of thrown and talked about in the recent earnings calls and other public presentations. With respect to Tyvaso, of the 30,000, if we were to capture just 10% of that market -- and I'm not saying that's a goal. I'm just using that as just a reference. We would double the size of the Tyvaso revenue franchise with just a small percentage of the PH-ILD market that we've talked about. So the opportunity for these patients who currently have no approved therapies, for us, is significant in 2 regards. One, it's an unmet medical need that we are committed and excited to address. But two, it also gives us an opportunity to grow the Tyvaso franchise. And so in the relatively near term, Tyvaso could be the largest revenue-producing product for United Therapeutics. And it's something that Michael Benkowitz and his sales and marketing team are planning for, again, to be able to launch the product, serve the patients but also garner market share from the opportunity that we've discussed.

How about TreT? Once it's approved, how -- I mean, how do you -- how -- by what percentage [indiscernible] know. How much does that actually increase inhaled therapy market share?

Yes. Thanks. It's a good question. So we think there is a sizable opportunity for dry powder inhalers for some of the things that we've actually already talked about in terms of ease of use, et cetera. So we do think there's a significant opportunity to transition patients for PAH and, as we said, ultimately, for these new indications in PH-ILD and PH-COPD, if they're approved, to a dry powder device. So we think there's a real sizable opportunity, and we're excited to complete the required work to be able to submit TreT to the FDA later this year, as we talked about.

And my last question is on kind of BD activities. So you have about $2.5 billion in cash. So what's the kind of your current focus on BD activities? What areas? What stage of development? Can you give us a little more details on that?

Yes, sure. So business development opportunities are still very important to United Therapeutics and in a capital allocation structure continue to be the second tier of our capital allocation strategy, right behind investment in internal research and development products. Several of those products, we've discussed in great detail today that we're really excited about. But we continue to evaluate novel therapies in PH and also outside of PH, such as our effort -- our business development efforts to address COVID-induced ARDS or some of the current activities in light of the current environment. But then looking at BD opportunities, we place an emphasis, Eun, around strategic fit of a therapeutic area for near-term revenues and the incremental value that can be added by UT, just among other filters, and includes therapeutic areas like cardiopulmonary disease, oncology and even organ manufacturing, although we're not just limited to these areas. But what's also really important when we look at business development opportunities is where we actually can use the strength of our resources in things like manufacturing, in things like clinical development, in things like regulatory and commercial to be able to take these opportunities and have them move to their full potential. And these are just some of the ways that we think about business development opportunities that, as I mentioned, are still really important to United Therapeutics.

Great, James. So we have less than 1 minute left. Any closing remark that you want to deliver before we end the fireside chat?

Yes. No, thank you, Eun. One is thank you for hosting Dewey and I. And I would just add, United Therapeutics, we're focused really on our patients by advancing our product pipeline to deliver long-term revenue growth to our shareholders.

Thank you very much, James. Have a great day.

Eun, thank you for having us.

Thank you. Bye.

Have a good rest of the conference.

Bye.