United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Good morning. Thank you very much for joining us at the 2020 Virtual Wedbush Healthcare Conference. My name is Liana Moussatos, and I'm one of the senior health care analysts at Wedbush. Dewey, would you like to read the forward-looking statement, please?

Good morning. Our remarks today may include forward-looking information about our business. And please see our SEC filings for risks and uncertainties that could cause actual results to differ. Thank you.

It is my pleasure to introduce our first presenting company, United Therapeutics. When I think about United Therapeutics, I think about a well-run pharmaceutical company having growth by innovation. Today, we are joined by the CEO, Martine Rothblatt; Chief Financial Officer, James Edgemond; and Head of IR, Dewey Steadman. Thanks very much for joining us. We will start with a fireside chat and transition to Q&A. [Operator Instructions]

Martine, let's start with why did you decide to form United Therapeutics and implement a growth-by-innovation business mode.

Thank you very much, Liana. We decided to start United Therapeutics because my youngest daughter was diagnosed with a fatal condition called pulmonary arterial hypertension. There were no medicines approved to treat the condition. And we were told that she would have to be listed for lung transplant, would probably die in a couple of years since she was only 6 years old. So it was either I leave my role at SiriusXM and find a cure for my daughter or she was going to die. So it was no choice. We just -- we decided to form a company and find a cure for pulmonary hypertension. We've not yet developed an absolute cure, but we do have enough medicines that stall the progression of the disease many times for decades, and we're hard at work on a cure. Meanwhile, we've developed a business model that provides value for lots of stakeholders, for shareholders, for doctors, for patients, for the employees, for the whole health care system with a wide array of different treatments to manage the progression of pulmonary hypertension at a wide variety of different price points. And at the same time, we're working to develop a cure, which would be a nonrejectable lung transplant, one that match the same DNA as the recipient. Such a cure not only helps my daughter and all the people with pulmonary hypertension, but also helps the hundreds of thousands of people each year who succumb to COPD and other end-stage lung diseases.

That's amazing. So despite the COVID-19 slowdown, your revenue beat Street estimates in Q2. Can you explain what the company is doing to maintain revenue growth? And is Orenitram part of that equation?

Yes. Thanks, Liana. We -- Orenitram is very much part of the equation. So patients with pulmonary hypertension, of course, continued to need their medicines all through the COVID pandemic. So we keep all of our offices and our manufacturing facilities open so that we can continue to produce the medicines that the patients need and ship them out to the patients, all during COVID, even in some of the most difficult hospitals to gain access to. And our team at UI Therapeutics has done an amazing job of continuing the production and distribution of our medicines to all of those patients. In addition, a lot of our patients are in clinical trials, where it's very difficult for the patients to get appointments with doctors and visit hospitals that are in COVID hot spots. So for those patients, we've worked with the FDA to gain approval for alternative means of measuring their progression, such as the use of actigraphy techniques and at-home spirometry so that those patients can continue to achieve end point measurements during the conduct of the clinical trial. In addition, our sales and marketing teams have developed very close virtual relationships with doctors so that patients can have their doses of Orenitram, Tyvaso or Remodulin adjusted during the COVID pandemic virtually by us talking with the doctors, the doctors talking with the patients. So through this kind of 360-degree approach of interaction with the doctors, the patients, our clinical trials, sales and marketing, med affairs people, we've been able to continue to grow our patient count even during the COVID pandemic.

That's great. So talking about growth by innovation, let's talk about some near-term pipeline products like the Remunity pump. What are the steps to commercial sales?

Yes. The Remunity pump is the one -- is the pipeline product which is closest to being launched. We have hoped that that was going to be launched on the 4th of July because it represents a tremendous sense of independence for the patients on Remodulin. However, we have had supply chain problems due to COVID with getting all the different parts and pieces necessary for the production number of those Remodulin -- of those Remunity pumps. We are working all of that out right now. It's very interesting, Liana. The pump has many fewer moving parts than any other pump that's out there. So in that case, it's kind of like a Tesla of pumps with very few moving parts. On the other hand, it still has a lot of nonmoving parts. And those nonmoving parts, we have to get from a supply chain that spans the world, and that has slowed down the availability of them. We're working very hard to commercially launch the product very -- as soon as possible this year. I can't predict exactly which month, but it's -- everybody is working literally day and night. The production teams up at DEKA, our manufacturing partner, worked 24-hour shifts to get this situation worked out. In the meanwhile, we have shipped training pumps to all of the nurses and the medical centers who'll be helping their patients. They are absolutely thrilled with them. So I do think that you're going to see the launch of Remunity just literally right around the corner, Liana.

That's great. Okay. So another exciting product. Can you provide some color on commercial launch plans for Tyvaso and PH-ILD?

Yes. Thank you very much. So the exciting thing about PH-ILD is that's what we call a virgin market. There's 30,000 patients out there who have no approved treatments. They had -- no treatments have been given to them because until the successful results of our INCREASE trial, which we reported last year, no treatment had ever been shown to be safe and effective for those patients. So we completed our trial. We submitted the information to the FDA. The -- our filing was accepted for filing by the FDA, and we expect the FDA approval of Tyvaso for PH-ILD patients to occur some time before the end of this year or, at worst, would be the very beginning of next year. That product would then be commercially launched for those patients next year. And I think you're going to see a very rapid uptake of that product because 30,000 patients have needed something desperately for so many years. So many of those patients have died without having access to any therapy able to help with their PH-ILD. And I'm really, really proud and honored to be on the cusp of offering a therapy for those patients.

Great. So for Treprostinil Technosphere, can you go over to the progress with the BREEZE Phase III study? And do you anticipate any delays for BREEZE and the pivotal PK study due to COVID?

Yes. Thanks for the question about BREEZE. So that's a product that we've joint ventured with MannKind. They've been terrific partners for us. And unlike the DEKA pump, which is a -- in a sense, a much more complicated device because it has to titrate the flow of Remodulin, the BREEZE inhaler, which is a version of a device that MannKind already sells for inhaled insulin treatment, has none of these same supply chain problems. So we're confident that we'll be able to produce the inhaler for BREEZE, which we call the Dreamboat device without any delay. In the meantime, the drug product that we need to put into the Dreamboat inhaler is on commercial stability right now. That stability batches will be completed this year. And then finally, the BREEZE clinical trials, there's 2 of them. One has 33 of 35 patients enrolled in it, and the other has 25 of 45 patients enrolled in it. The last 5 patients were enrolled just last month as we restarted enrollment. So that's a very nice brisk rate of enrollment. I feel highly confident that we'll be able to get BREEZE completely enrolled before the end of the year. The supplemental NDA will then go into the FDA, and we fully expect that product to be approved and launched in '21.

Great. So can you also talk about your work in COVID-19?

Yes. We've got a number of very interesting and, hopefully, life-saving projects going in COVID-19. One of them is a partnership with Celularity in which we are going to test the use of placental-derived natural killer cells to be able to help dampen down the cytokine storm, which is so often the end-stage result for patients with untreatable COVID-19. In addition to that, we are working on a -- with our Global Medical Affairs group on a scientific study of using our own produced exosome product. This is a cellular vesicle that has a lot of regenerative medicine properties to use that to also treat the cytokine storms and the -- ultimately, the acute respiratory distress syndrome, which is the last stage of COVID for so many of these patients. In addition to those 2 projects, Liana, we also have manufactured a next-generation type of ECMO device. This is a portable device that uses a nonfollowing membrane to exchange of blood gases between oxygen and carbon dioxide. As you know very well, ventilators and weeks and weeks on ventilators have been the end game for all too many patients on COVID-19. So our total artificial lung project will give an opportunity for these patients to not have to be completely knocked out with medication, which itself predicts a bad outcome for COVID. They'll be able to be alert. They won't be intubated and still be able to get the oxygen support that their lungs need when they're recovering from COVID-19. And then last and not least, you've probably followed the news reports where there are an increasing number of lung transplants, double-lung transplants for patients for whom COVID-19 completely decimated their lungs. United Therapeutics is a leader in this field of manufactured lungs and other organs for end-stage diseases. We now have successfully saved the lives of 150. We just crossed the 150th milestone of patients with our manufactured lungs. And I suspect that our manufactured lung effort is going to end up saving the lives of more and more people for whom COVID-19 just simply ravaged their lungs beyond repair.

That's amazing. So let's move on to medium-term pipeline products and talk about pipeline extensions for Tyvaso and COPD with a Phase III PERFECT trial. Why was the study initiated? And what is the design and market potential?

Sure. So the study for PERFECT, which is the use of Tyvaso, as you mentioned, in COPD, was initiated at the strong urging of leading clinician investigators in the field of pulmonary hypertension. Dr. Waxman up in Boston was very, very persuasive. He had seen anecdotal results in his own very large practice, he's got nearly 1,000 patients, that Tyvaso was effective in treating the COPD patients and strongly urged us to do a randomized, placebo-controlled, double-blinded study. So it was at his urging and the urging of other of his colleagues in the pulmonary hypertension field that we initiated this study. And the study has, to date, enrolled upwards of around 20 patients. Unfortunately, as the study was really getting into its increasing enrollment mode, that's just exactly the time that COVID hit in the March-April time frame. So as with all of our studies, enrollment was all but frozen initially. And while some of our other studies have begun to increase enrollment, again, the PERFECT study, it was decided by decision of the steering committee, our clinical trial management. There were some input from the Data Safety and Monitoring Board to make a couple of amendments in the PERFECT protocol, to make the study more resistant, if you will, to any potential second wave of COVID. So enrollment can continue right through whatever it is that the natural environment throws at us over the next 12 months. One of the -- one of those end points is for -- one of those amendments, for example, enables us to place in an alternative primary end point measure of using the actigraphy technique to measure activity of the patients at home in lieu of doing the standard 6-minute walk up and down the corridor of a hospital. So these amendments have gone in. They're now going through the IRB process. It will make the PERFECT trial resistant to any further delays that might come from COVID. So right now, we've -- as mentioned, we've had 20 patients enrolled. Probably 10 of those 20 patients we're not going to be able to use the data for because there was -- it was too many variations due to COVID imposed on their revisits to hospitals. 10 or so of the patients' data seems very strong and solid. The size of the study is around 100, 110 patients, something like that. So I'm very confident that enrollment will pick right back up as soon as these amendments go through in another month or 2. It will then be a rapid enrollment study during the balance of 2021, and we're certainly very hopeful to have a filing and then a FDA approval for this sometime in late '22.

Okay. What about the Phase III TETON CF ILD study? Can you go over it this time?

Yes. Sorry, Liana. Yes. That to me is like one of the most amazing studies that United Therapeutics is doing because it's the first study that really branches United Therapeutics outside of the field of pulmonary hypertension. CF ILD is an acronym for chronic fibrosing interstitial lung disease, and it's something that has actually nothing to do with pulmonary hypertension. It's another type of interstitial lung disease. And we were able to know this incidentally in our secondary end point measurements from INCREASE that we were able to actually improve the breathing, the measures of forced expiratory volume of the patients with pulmonary fibrosis and that we were also able to actually reduce the amount of fibrosis they had. So this was an actual disease-modifying effect of Tyvaso that we saw in the secondary end points of the INCREASE study. Now because we saw this in secondary end points and because the purpose of the study was not to treat non-pulmonary hypertension ILD, we had perfectly set ourselves up with a beautiful hypothesis to test in a forward-looking Phase III study. So we call this forward-looking Phase III study TETON, and it will enroll only patients that have chronic fibrosing interstitial lung disease. And we'll be able to compare the patients who are on the currently -- 1 of the 2 currently approved background therapies for interstitial lung disease, which -- those background therapies currently approved are not disease modifying. They only slow the rate of degradation in the patients' abilities to breathe. We'll be able to compare the background therapies with the background therapies on top of Tyvaso. And we believe that will show in the active group an actual improvement in the breathing ability of the patients, meaning a decrease in the fibrosis of the patients showing actual disease-modifying effect of Tyvaso, which will open to -- up to us the literally multibillion-dollar market of pulmonary fibrosis for Tyvaso.

That's exciting. Okay. And can you provide an update in the ralinepag trial and compare it to Uptravi?

Yes. Fortunately, we have been able to continue enrollment in the ralinepag trial. Those are global trials, so they also are occurring in places that don't have so many COVID hot spots. So it's been a little bit easier to keep momentum going in the ralinepag trials. Those are 2 trials. They are enrolling nicely. We won't be able to compare the results of patients on ralinepag with patients on Uptravi until the end of the trial. And of course, even then, it will be an indirect comparison because it's not a head-to-head comparison of ralinepag with Uptravi. But the -- one thing is immediately known, which is that with ralinepag, we have a greater ability of titratability and we also have once-a-day dosing. So those will be certainly comparative advantages versus -- vis-à-vis selexipag. And there is a feeling among the investigators in the field that from the Phase II work, ralinepag showed a kind of best-in-class potential among these prostacyclin uptake agonist. So we're very, very excited and hopeful. And the #1 spend in the United Therapeutics product development area is on the ralinepag study. So we're going to be pushing those studies forward as absolutely fast as possible.

Awesome. Okay. So you kind of touched on this before, but can you talk about organ manufacturing, like the 3D organ printing, regenerative medicine, EVLP and total artificial lung?

Yes. So we've talked already about 2 of those activities, the total artificial lung group, which hopefully before Christmas, but if not, I believe very confidently early next year, we'll be able to have the first total artificial lung deployed in clinic for treatment associated with end-stage COVID. So we're working very hard on that. I've already mentioned the EVLP-based method of lung manufacturing where we've crossed 150. We're continuing to go strong and we're seeing rising demand as a result of end-stage COVID-impacted lungs. The other activities that we have in organ manufacturing include organ manufacturing of kidneys for patients on dialysis; organ manufacturing of hearts for patients who have conditions that are either inconsistent with ventricular assistance devices or are inconsistent with being able to have a heart transplant; and then finally, manufacturing of lungs, which are 3D-printed and cellularized with differentiated iPSC cells from the intended patient's own body, so that those patients will have these 3D-manufactured lungs and will not be -- need to take any immunosuppressants for the rest of their lives. The lungs will look to their body exactly like the DNA of themselves. So all of these programs have been going on full speed altering COVID. Fortunately, COVID has not shut down our R&D labs, although we take great care to protect our employees and everybody involved in those activities. With regard to the kidneys, we are now in the midst of our pivotal preclinical treatment, meaning the pivotal transplants into baboons of our 10-gene kidneys that the FDA has said that we achieved 6 of these baboons able to survive for 6 months with our 10-gene kidneys, and are able to birth to extract these kidneys within our designated pathogen-free production lab, which we've established outside of Birmingham, Alabama. Then we would be able to bring those kidneys into the clinic to treat patients with end-stage kidney disease who've been too many years on dialysis, which unfortunately, there are many tens of thousands of those patients who have no alternative. So based on that schedule, if we achieve our success in the pivotal xeno-kidney experiments, then we should be able to do our first clinical xeno-kidney experiments in -- should be like the second half of 2021, which is of course so close, and it provides such great hope for all the patients on dialysis. In the meantime, we've just passed a record with our xenoheart transplanted also in a baboon at the University of Maryland Medical Center under the aegis of Dr. Bart Griffith, one of the country's most accomplished heart and lung transplant surgeon. So he's extremely excited with the progress of our multiply genetically modified xenohearts. By the way, these xenohearts, they don't have any of that hyperacute projection or any of those problems that plagued the xenohearts back in the 20th century. We're like way past all of that. And then finally, on the 3D printing side, we're doing amazing work, Liana, with the cellularization of the lungs in Research Triangle Park with the 3D printing of the scaffolds up in New Hampshire in partnership with 3D Systems. We 3D print these lung scaffolds out of human collagen, which has grown in genetically modified tobacco plants in Texas off the campus of TAMU, Texas A&M University. So it's really amazing. At the same time that we're going to be restitching together the bodies of these patients with end-stage organ disease with new organs, the stitching is actually coming from kind of stitching all the best R&D capabilities of the United States from Texas, Alabama, New England, California with our exponential bioengineer -- biotherapeutic engineering group. So it is a huge teamwork. And my favorite mantra, Liana, and it applies to organ manufacturing, more than anything, is that teamwork makes the dream work. And I realize that organ manufacturing sounds like a dream to a lot of people. It's a dream to me, but it's an absolute cure for people who have end-stage organ disease. And we're not going to stop, and we're going to keep applying our teamwork until we make that dream work.

Teamwork, dream work, that's awesome. Dewey, you have a clarification you want to make?

Thank you. So just really quick on our outcomes -- not our outcome study, the INCREASE study. The sNDA has been submitted. We're looking forward to acceptance, and we'll let you -- let the public know when that acceptance occurs and our time frame for potential approval of that product. And that's my clarification. Thanks.

Okay. Well, we have like a couple more minutes. Any updates, Martine, on the eNOS gene therapy for pulmonary hypertension, the SAPPHIRE program?

Yes. Thanks for asking about that one, Liana. And thank you, Dewey, for that correction. I got a little bit carried away there with having reviewed the press release, but it didn't actually happen yet. So thanks, Dewey. The endothelial nitric oxide synthase or eNOS gene therapy study for, again, a cure for pulmonary hypertension, we hope, has continued to progress all during COVID. I don't have exactly in memory the exact number of patients who've been enrolled so far. I think it's, roughly speaking, Liana, about 20%-or-so enrolled. None of the patients have bounced out of the study. So that's very exciting from a safety standpoint. What our goal is with this study is we take a blood draw from the patients. And then we find, in the blood draw, their lung progenitor stem cells. We then send their lung progenitor stem cells to a cellular transfection facility where we correct the gene error in those patients with a transfection of the endothelial nitric oxide synthase gene. We then freeze a number of aliquots of their now-corrected lung progenitor stem cells. And depending on the stage and the protocol, either every month or every 3 months and, ultimately, just once a year, we then ship an aliquot of their corrected stem cells back to the patients, which are transfused and the patients go on about their business. So what we're hopeful is that we'll show that we ameliorate the signs and symptoms of pulmonary hypertension with these corrected gene therapy genes as part of this gene therapy treatment. And that we're extremely hopeful that we'll be able to show that if they receive an aliquot of these corrected genes even once a year, that we're able to maintain that improved status for them.

Well, thank you for everything, Martine. This has been amazing, and we are out of time. So Martine, James and Dewey, many thanks for joining us virtually here today. And with that, we will conclude the fireside chat. Thank you very much.

Thank you for inviting us, Liana.

Thanks, Liana.