United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Okay. Now we're on to the Envisioning Future Disruption and Developing Radical New Business Models. And welcome back, Joe Puglisi, VP of IT at Nice-Pak, to facilitate this stellar panel. Joe, welcome to the program.

Thanks, Hunter. It's great to be here. And I have a wonderful panel lined up. With me today is Candace Fleming, whom we've already heard from, the CIO and VP of Information Technology at Montclair State; Mike Hughes, Senior Executive, Product Marketing at OutSystems; Vipul Nagrath, Senior Vice President of Product Development, ADP; and Shola Oyewole, Vice President of Digital Innovation at United Therapeutics. Thank you all for coming on the program today. Earlier, we heard Clark Golestani report how companies have used technology to transform and drive better business outcomes, especially in this COVID-19 environment where competition has been so heightened and the need to change is almost life or death for companies. CK also emphasized the need for speed.

And Mike, I'm going to start with you. What is -- OutSystems recently hosted their NextStep conference, and a number of your customers were featured. So we want to hear some of the shifts in the business models that your customers have experienced. Can you talk about that?

Sure, Joe. Thanks for having me on. Appreciate that. My title may say marketing, but over 20 years has been in technology, so hopefully, don't judge me too quickly there. But one of the great aspects of my role is I get to work with our customers during our NextStep event. We have 18 customers speaking from around the world. And digging into their stories was just very, very illuminating, right? It gave a good view of what's really happened to organizations and the sort of change they're going through. So I'll just give a few examples to kind of start us off. But Estafeta, a Mexican logistics company, spoke at the event. Hit by the pandemic, they basically had an 83% drop in shipping volume, right, as their people were out and they were unable to deliver. They needed an alternative very, very quickly. In a matter of just 10 days, they were able to create a new solution, enabling partners to deliver packages for them, so Uber, taxi companies, third-party drivers and so on. And when they spoke at NextStep, they have over 2,300 external users now helping and have delivered over 1 million packages using that and each other. In fact, they've now grown delivery volume by over 50%. So something that was a challenge has now become a new business channel, a new business opportunity for them. And they were able to adapt very quickly. Lucro, a U.S.-based credit union services company, huge surge in loan volumes because of the PPP, right, the Paycheck Protection Program. They had to improve their processes to cope and under a week built a new app to streamline that process, handled thousands of PPP loans, right, helping businesses around the U.S. STEMCELL Technologies, the last example, a biotech company based in Canada, had to move to work from home, of course, like most of us, and needed to be able to support their employees. Literally overnight, developed a mobile app to be able to track employee wellness, track the location of key assets to enable them to do -- to run their business. So the key themes are as technology -- we talk about speed, technology as the enabler, in many cases, takes people as well. But the time frames now, we're talking about days and weeks, right? This is not months and years. The time when they had to respond has shrunk amazingly.

That's remarkable. So they leveraged third-party delivery services to augment the deficiency they had through this application. That's really cool.

Yes.

But let me go over to Vipul, if I may. How did ADP shift its technology to deal with this pandemic?

Sure. So look, as we all went through all this, right, we had a lot of things we had to pivot and shift to very quickly. Now as many of you may be aware, ADP, we have over 810,000 clients globally, servicing over 40 million employees of -- client employees where we're doing payroll and other HR, human capital management functions for them. Now -- and on top of that, we had 58,000 of our own employees that we had to very quickly shift and get home. So the first movement came is that we had to get all of our technologists, all of our salespeople, all of our customer service people home and up and ready and working. And that happened at breakneck speed. And literally within a couple of weeks, within a few weeks, we were all home and fully up and running and productive. Then as all around the world we had new sets of regulation that came out, new programs that were coming out. Like, right here in the United States, I'm not just talking about the PPP, but before we had the Payroll Protection Plan, we had the FFCRA, which is the Families First Care -- a relief cares act, right, or also known as the CARES Act. So we had to pivot and shift and add into our products and build products and new solutions for our clients to be able to get the information that they needed to go apply for those loans, to be able to understand what the tax ramifications will be and what the filing ramifications will be if they take the CARES Act and then also try to balance between the 2 which -- does program A work better for me or does program B work better for me. So we had to use a lot of our own insight as well as actually take the official guidance that we're getting from the government and be able to offer up solutions to our clients and make them effective and make sure that, look, they still have the trust in what they were doing, that they still have the trust in our systems. And then what that actually resulted in is we had over a 50% increase in inquiries coming to us early on. And because literally, companies were like, hey, what do we do, right? We need your help, ADP. Within 3 days of the CARES Act passing, we actually had one solution out there on the PPP loan side. As the loan was made available, we had the data available for our clients to use to go apply for the loan, right, because you actually need it to show what your payroll look like. And what a number of people don't realize is that if you had employees making over $100,000, that they were not eligible for the PPP loan. So you couldn't use those employees as part of the basis for your loan. So we had to get all these business rules into the system very quickly. And as Mike said, yes, this wasn't about like, "Hey, take some months and go figure it out." This was, "Get it, figure it out in hours and days and release it in days, right, and just get everyone up and running." So that was the stuff that we did immediately during that. Now there's other things we're working on now as we're coming through from that because, I guess, now it's time that we pay those loans or get forgiveness for them.

Right. Right. So not only did you have to be agile in a shifting regulatory sense but you also have to have the developers and the testers and all this coordination in a completely distributed fashion.

Absolutely. Absolutely. It was quite a challenge. And I will say I was very proud of how the entire company responded and worked for this because, yes, look, we were -- as technologists, we were there to make sure, as the enablers, to make sure it happened. So then the whole company had to actually use what we built.

Yes. Yes. Amazing. Henry Taft must be just smiling from on high. So let me go to Candace. You're in the academic world. How are students reacting to the changes in the way that classes are now being delivered during this pandemic? We all know that there's probably some behavioral issues on campuses around the country. But generally speaking, how are they receiving this new environment?

Well, speed seems to be the name of the game on today's conference. So as you all know, last spring, as the pandemic hit, like all educational institutions, we pivoted all classes online. The faculty got a longer spring break. They get 5 more days, and they convert all their materials. We worked with them on the best teaching practices in an online environment. But candidly, there wasn't a whole lot of time to get ready. So we probably shouldn't have been surprised that at the end of spring term, we did some student surveys, and the students told us that they wanted to return to campus. They said they want that social and intellectual stimulation of engaging with their peers. Now we know there's little drinking involved, too, but it's actually coming to class and engaging with the faculty and their peers. Plus, we actually believe that students learn better when they are in an on-campus environment. So we went nuts, putting in new technologies, cleaning protocols, practices that would actually allow faculty to teach both students in the classroom and Zoom at the same time and actually do it well, we thought. But once the fall term started, again, maybe not surprising, we did discover that fewer students showed up in the classrooms than we were expecting, and a lot of them still engaged online even if it's from their dorm room. But when you thought about it, what they told us is engaging with, say, half a dozen students in the classroom, social distancing, is not the same as engaging with the whole class. The rest of their colleagues, their student colleagues were online Zoom-ing. So they didn't necessarily feel it made sense to make it to the classroom. So we really discovered that it becomes really important to reestablish that campus culture. It's as important to have activities going on on-campus as to have high-quality learning materials. So we're really working on trying to bring that culture back, albeit in a slow, phased fashion as we're all working through this COVID crisis.

That's interesting because we haven't really talked about the loss of that sort of camaraderie, stimulation of being in groups in the business world, right? We're all working from home and Zoom-ing together, and we also miss that opportunity. And I want to ask you one more question, Candace, if I may. How has the faculty adapted to classes online? Do they like it better? Or are they put off?

There's actually 2 answers to that. So first of all, faculty, like all the rest of us, have been really afraid to go back to interacting with people on campus or in person. They're just concerned about safety. And in that sense, they'd prefer to be teaching online, whereas we're trying to get them back to campus. What we found is it's been really important to implement the CDC-recommended protocols and then be really transparent with faculty as well as students and parents about what we are doing, so that they feel safer being on campus. But then the second part is, frankly, it's been a ton more work for the faculty to prepare to teach online, on-campus, hybrids, could switch from day-to-day from hour to hour depending on what Governor Murphy is saying this week. So we've really been working hard with them to adapt their teaching styles to try to be as effective. But overall, they've been amazing and have been putting in a ton more work to be able to teach in all these different modalities actually simultaneously.

That's great. That's great. I'm going to come back to you, Candace, but I'm going to go to Shola now for a moment and talk about something near and dear to my heart, the pharmaceutical industry. I support both Nice-Pak and PDI, which we all know is in the pharmaceutical space. What impact has the pandemic had on your industry, Shola, or our industry?

Thank you, Joe. Good afternoon, everybody. Thank you for joining us today. Well, my company, our focus is in drug development, in what you call orphan drug market, and that is a market that comprises patient size of less than 200,000. And for that reason, customer intimacy is our #1 priority. It is so important that we have close relationships with our doctors and our patients to make sure we're providing the best therapy possible for our patients. For that reason, our sales force are trained and equipped, all right, to build those relationships. Now as you know, in the pharmaceutical industry, sales reps have to visit doctors to teach them or inform them about the new drugs that they carry. Well, with the pandemic, doctors stopped those visits. Their focus became purely to their patients and the sickness of their patients. So sales reps in the industry, in general, stopped making house visits, so to speak. So what we did was, because we already have intimate relationships with our doctors as well as their patients, we pivoted to embrace technology, video technology, FaceTime-ing, Zoom calls, Teams calls. While many of you would ask and say, "Well, why didn't people do this before?" Well, the reason is simple. In the health care industry, medical doctors have been very reluctant to adopt that kind of technology to see patients because it wasn't necessarily reimbursable. How do you bill a patient for a 2-minute call, when if he came into the office, you could bill them for a 1-hour visit? But with the pandemic occurring, doctors were forced to begin to see patients, leveraging technologies, that's called telemedicine. And because doctors became comfortable with telemedicine, they became comfortable dealing with our sales reps using technology. So that was the way we've been able to keep our relationships strong with our health care practitioners and our patients. The pandemic has made the industry itself, the medical industry, comfortable with video technology.

That's awesome. That's awesome. Stay right there, Shola. I want to read something. According to a recent Forbes article, I just saw this the other day, response to the business potential of digital technologies, which you're talking about here, is still lukewarm at best, with only half the executives buying into the potential. This is the interesting part. Slightly more than half, 52%, see artificial intelligence as very or extremely relevant to their business. How is UT leveraging AI or machine learning in the pharmaceutical industry?

Fantastic question. Again, because my company, UT, participates in what you call the orphan drug market, because of the limited size of patients, there's a dearth of information, mainly there isn't enough data. So what we've done is we've rolled out -- or we're in the process of rolling out machine learning tools that can provide insights that are inferred from what you call surrogate data. So while you might not have direct data about patients and their illnesses, you can infer from surrogate data what patient -- or what therapy patients are already on. And that can be your target market, so to speak. So in short, we're leveraging machine learning to build better insights into new markets we're expanding into. Today, our orphan drug market is the pulmonary hypertension market. Our new market is the manufacturing of lungs either through 3D printing; xenotransplantation, which is altering the genes of pigs and growing organs on them to be further transplanted into humans. That is our goal. And as you know, that market is -- today does not really exist. So -- but using machine learning and forms of AI, we can begin to find insights as to the possibilities of the size of our market.

Incredible. And that is what we've heard earlier speakers talk about for creating entirely new businesses out of this new environment that we find ourselves in with the kind of computing power and data analytic technologies that we have. The -- you can figure out the efficacy of your drugs. You can probably model the success rate of these artificial organs. We can only hope that the FDA and the other regulatory agencies also accelerate their abilities to approve these things and get them to market sooner. Yes, I want to jump over back to Vipul and ask the same question. How is ADP using AI or data insights to address some of the issues they're facing these days?

Well, on top of everything else we've had going on this year with the pandemic and a global pandemic, we've also had, in this country, some very specific social issues and social unrest that we've had to deal with. So one of the places, in fact, where we've been using our data insights and our AI is through a set of services we call DataCloud. So we have an entire DataCloud set of services where from DataCloud, we can do executive manager insights, we do storyboards. We do compensation benchmarking. We have a skills cloud. We do organizational benchmarking. We also do data mash-ups. So we're taking data from different systems and putting them together and getting the insight out of that. So one specific thing that we've done -- or I'd say 2 specific areas right now for the social unrest that's going on is, one, we've got some pay equity storyboards. And those pay equity storyboards are used to give managers insights into places where they may have gaps or pay equity gaps when it comes to gender or race or ethnicity. And then once the managers have those insights into those gaps, now they can take actions to go correct them, right? Otherwise, it's like, "Hey, if you don't know the problem that it's there, I can go fix it." But we use the data in our customer systems to show them where they might be having these pay gaps and the reasons that could be causing it, right, so they can take those actions. In addition to that, we are working on and not yet released, we're working on some D&Is, some diversity and inclusion storyboards, and some things that will make it basically really easy for our clients to see what does diversity and inclusion really look like deep in the organization, not just something you talk about at a high level but really organizationally what's going on in there, so that they can see from dashboards what does their population look like, what does it look like by level. Meaning, do I have the same representation at every level of management as I do at my frontlines, right? It's not enough to say, "Hey, hey, look, I've got 30% of this population represented." But is it represented at every level? So it's those types of things that we're working on, and we're using the algorithms and machine learning, data insights and AI to surface all this information for us.

And I'm sure you're also taking into consideration privacy and security because these data are quite sensitive. I imagine you want to protect this.

Absolutely. Yes. And yes, these are solutions that we're offering, building for our clients, to use on their own data, right? When we have benchmark data from the industry, that's all -- it's all not identifiable. So it's just that here, it is a benchmark that's out and you could see how you're doing against benchmark. But for your own company, we give you that insight of what does look like from a diversity -- we will be building that diversity and inclusion dashboard, and we already have the pay equity storyboards.

Great. Great. Yes, I see by [ Mickey's ] big hand, we're technically out of time. But I want to give everybody an opportunity to close with some comments on this last point, companies returning to the workplace. I read that Google, Target, Microsoft, Ford and probably some others now have all announced work-from-home programs through July of next year. Vipul, as long as you're on the screen, how is technology going to improve employee support as companies look to bring their people back to the office in greater numbers?

Yes. Look, I think one of the things that we're working on, and I think there's others working on the similar solutions, is for the return to workplace, we've built a set of solutions where we can survey folks, how are they feeling. Like, do you feel comfortable coming back in? We can allow the managers or administrators to do a selection of what groups they want to bring back, like if they want to start at 10%, 25%, how do you want to bring them back. Assign those return dates, get attestations from every employee on a -- literally, right now, we're doing it on a daily basis, do contact tracing and, in addition to that, also provide solutions. And in fact, we've already got this released, where when you walk up to the front desk and the kiosk is we've made it touchless. We will use facial recognition so you can clock in to get in to work as opposed to you even physically having to touch something or put on your fingerprint or swipe a badge to walk into the office.

Awesome. Awesome. Hunter, are we out of time or...

Pretty much out of time. But final -- the closing comment, I always like to finish it like this, Joe. Candace, is it the best time ever to be a tech professional?

I don't know. I think it depends on what hour you're asking. But I have to admit, the last 6 months have been fascinating. I don't want the next 6 months to be just like them, please.

Good answer. Mike?

Yes. I mean, as a vendor, it's a great time to work with technology professionals, right? The compelling events of -- around us and the time to change has shrunk so much that there's a lot of help to give, and people are receptive. So it's a good time to be a technology professional.

Thanks. Shola?

Well, I like to call it a merger of both. I just say business -- now technology is a part of your business. Now technology sits at the table we've always wanted all along. Kudos to all of you.

Love it. Love it. And then, Vip, final word?

Yes. Final word, I think Shola said it very well. The reality is technology, it's really -- it is now showing up in the outcomes, right? The actual outcomes are based on the things that we're delivering.

Awesome. Joe?

You've already asked me this question. I'll repeat my answer: best time ever.

Great job. Great job, guys. Thanks, everyone, for being here. And by the way, great summit. The content really was exceptional. Thank you very, very much.

Thank you, everybody.

Thank you.

Thanks, everyone.

Thank you.