United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Okay, everybody. This is Marty Auster. I'm the lead SMID biotech analyst here at Crédit Suisse. You are joining me today to discuss United Therapeutics at the 29th Annual Crédit Suisse Health Care Conference. I think this is the first time I've had the pleasure of hosting my friends from United Therapeutics at the Health Care Conference. I've got Mike Benkowitz, the Chief Operating Officer and President of United Therapeutics. And I'm going to pass it over to Dewey Steadman, Head of Investor Relations, to make a few forward-looking statements, and then we'll kind of kickoff some Q&A. Dewey?

Yes. Good Afternoon. Our remarks today may include forward-looking information about our business. Please see our SEC filings for risks and uncertainties that could cause actual results to differ. And thank you. So I'll turn it back over to you, Marty.

Sure. So Mike, it's great to see you again, it's been a while. I think United has been such an interesting story over the last couple of years, and it's been -- there's been so much focus around this kind of oncoming onslaught of generics versus Remodulin. And I think you guys have obviously weathered that really well and done a nice job of protecting that business. And now your kind of starting to play some offense and kind of a potential to maybe return to growth in the future. So maybe if you could kind of just frame the last couple of years and kind of where you're at now and look forward as to what the objectives are over the next several years?

Yes. Thanks, Marty. It's good to be with you. Thanks for having me. Thanks for having the team. Looking forward to the conversation. Yes, I mean, we just kind of think about even over the -- this year and over the last couple of years, as you suggest, I think we've been really, really pleased with the resilience of the business, the performance of the cross-sell franchise. I mean if you kind of think -- we released our earnings a couple of weeks ago, and we're seeing double-digit year-to-date growth in both Orenitram and Tyvaso as well as Unituxin, which is our oncology product. And then sequential growth in U.S. Remodulin quarter-over-quarter. And so I think we highlighted the fact that despite the competition across all of our brands, we have a record number of patients on our treprostinil products for the fourth quarter in a row. And really pleased to see that all 3 products are contributing to those milestones. We have the highest number of Orenitram patients. We're just shy of the highest number of Remodulin patients, and we're at a 5-year high of Tyvaso patients. And I think there's -- as I kind of think back over the last couple of years, kind of what we've experienced, the challenges we've had, the wins we've had. I think there's drivers with respect to each of these that I think have resulted in where we are and portray very positive things for United Therapeutics as we move into the future. So if you think about Orenitram, obviously, we had the EV label expansion last October. And I think that data and the related analyses with that data have really nicely rounded out the value proposition for Orenitram and distinguished it in the marketplace. In addition to that, finally achieving the reduction in the risk of morbidity and mortality. We've been able to show improvement in key hemodynamic and clinical measures, which is really important because patients want -- they don't want to just get worse or stay the same, they want to get better. And so that's been really powerful. And then obviously, you look at sort of the cost effectiveness of the drug relative to its nearest competitor, despite the fact that you've got similar adherence persistence and rate of PAH-related hospitalization. So I think the value proposition is really strong. We think this is resonating very nicely with physicians, including those in KOLs and really large academic centers that have previously been pretty negative on Orenitram. So they're kind of coming back taking another look at Orenitram, starting to write. If we're able to kind of get them back on board, obviously, that's just going to accelerate our growth because of the size of their practice. On the Remodulin side, obviously, we've been competing with a generic entrant for about 1.5 years now. And as you said, we've really, I think, weathered that storm very nicely. I think there are several reasons for that. I mean there's just a lot of buzz around parenterals, if you think about it. First, there's been a steady stream of data that's been coming out from researchers, showing that if you're able to get the PAH patient's mean pulmonary arterial pressure below 48 millimeters of mercury, you improve the life expectancy of patients significantly, like going out to 10 and 20 years. And the drug that's doing that is the parental prostacyclin, such as Remodulin. And so that's not UT data that's coming out. This is just coming out independent from researchers really across the world. And so there seems to be a groundswell of support building to really kind of focus on how do we drive down pulmonary artery pressure and improve the long-term outcomes of these patients. I think for our part, what we're doing is, certainly, we've got a lot of buzz around the Remunity pump and the ISR pump, which I'm sure we're going to talk about as we go forward. And so we've been engaging with institutions on preparing for the launch of both of those pumps. There's been a lot of excitement, a lot of share of voice around Remodulin. And then thirdly, believe it or not, I think that generic competition, in a weird way, has kind of worked in our favor. So we've been out talking about Remodulin. We've been talking about the value of the brand, the importance of the brand and the services that we provide. You've got a competitor out there that also has a sales force and has been talking about parenteral prostacyclin. And where that's netted out is, I think it's pretty clear at this point that physicians, they find value in the brand. And so that increased sort of discussion and noise, for lack of a better word around Remodulin has been -- has kind of worked towards our benefit. And then finally, on Tyvaso, just to kind of round this out, I think for a while, it was sort of this middle product that was getting squeezed on the one side by the orals and on the other side by the parenterals, and we saw that really starting with the launch of Orenitram and Uptravi about 5 years ago. And that started -- I think started to break free a little bit a couple of years ago as physicians realize that, okay, while the orals certainly add value to the treatment armamentarium and there's -- and patients prefer orals. They're not the panacea that I think everybody thought they were. So there is still a role for inhaled therapy. I think what's really sort of accelerated that or added some juice to that recently was our increased data for PH-ILD. And so while that doesn't really have anything to do with PAH treatment, we sort of got what we call this halo effect around Tyvaso, where physicians see this increased data, they see how positive that study was, and it sort of reminding them how great a drug Tyvaso is. And I think that's kind of leading them to kind of come back and prescribe that for their patients. So I think it's really just been -- like I said, there's been some challenges, some wins. But I think we really feel that given where we sit here today, plus what's coming here in the very near future, we're really well positioned to continue on this trajectory, if not even at a higher level.

Okay. Let's dig into each of these, I guess. Let's start with Remodulin. So a couple of questions, I guess, to start. Has the -- I guess, has the ship sailed on the generic risk to Remodulin? Is that something that you think still kind of looms? Or what are the factors that you think have kind of been the main contributors to a lack of generic uptake? And is there any chance for changes in the future to kind of cause that risk to kind of resurge? And then if you look ex-U.S., I think there's been a little more impact on the business in Europe. Could you touch on that briefly as well?

Yes. I mean, I'm a little superstitious. So I'm never going to say like it's over or nothing can happen. I just -- I'm certainly really, really pleased with where we are. And then I think the fact that we're sitting here today 18 months after a generic entry, and we've got an all-time high number of patients is -- I mean, we've always been, I think, very optimistic as to how Remodulin was going to perform. But I think we probably surprised ourselves a little bit in how well we've been able to maintain this business in the face of competition. I mean, I think the reasons for that come back to what I talked about, I think the brand loyalty. I mean, I think it first and foremost -- I think you're dealing with a set of patients here that are really, really sick. They -- and the doctors, if they've got a patient that's doing well, are really reluctant, I think, to mess around with switches and whatnot, unless their hand is forced. We've got some service offerings that I think differentiate us in the market. We've got 17, 18 years now of supply chain reliability, 2 years of inventory, 3 years of API. So I think it's just sort of like all of these things are right in the category of brand loyalty, they matter to physicians. So they're not really...

I agree. The unusual part of the market has been that there hasn't been a forced hand, right? So I guess I want to understand what's the dynamic of that? Is that the severity of the disease? Is that the price differentials isn't great enough? Is it clinicians pushing back to the payers? Like what are the components that drive that? And how sustainable are those?

Yes. I think it's a combination of everything. One is sort of just the size of the market. I mean, you think about the grant scheme of things, it's a pretty small disease state and then the number of patients on Remodulin is even smaller. So if you break it down to like an individual payer level, right? It's a small number of patients that these payers have on this drug. And even though it's expensive, sort of like how -- where are you going to kind of spend your time? Where are you really going to kind of force things? Plus, you've got the fact that it's sitting in the medical benefit, which is a very, I think, manual process. It's not as easy to sort of mandate policy changes and switches in Part D or medical as it is over on the pharmacy benefit. I think the pricing differential helps, makes a difference. And it's really, I think -- and then again, just the physician preference for it. So you've got sort of all 3 of those factors working in our favor. And then I think the other thing that sort of helps us and overlays a lot of this is that at this point, on the subcu side of the business, which is slightly more than a majority, we're sort of the only game in town given the pump situation.

So let's say -- let's take that and run with it a little bit. So you had a new pump approved, Remunity. And you'll be launching that through the early part of next year. Could you kind of maybe update us on where you're at with kind of supply on that front? I know product supply, pump supply, drug supply is like job #1 at UTHR. Can you tell us where you're at with that? And then kind of do you expect once that supply is there, what is the appeal of this new pump relative to kind of the old system? And what does that do to kind of your visibility and your protection of that franchise as you'll be presumably the only ones with access to that pump?

Yes. So yes, very excited about Remunity. And so for those that are listening and are not familiar. So this is our new subcutaneous pump. So it's 1 of 2 new pumps so we're expecting to launch here in the next 12 months. The others are IV pump, the implantable system. So with Remunity, we had hoped to launch that earlier this year. We ran into some COVID-related supply disruptions with our manufacturing partner, DEKA, in terms of them being able to source raw materials and components to build a launch supply. So we seem to be behind that. They're -- right now, they're producing commercial supply. I think in light of COVID, and as you mentioned, just our kind of long-term bias towards having as much supply on hand as we can so that if there are any manufacturing disruptions, our patients are taken care of. We want to build safety stock. We don't want to be in a situation where if there's another huge outbreak or shutdown related to COVID or anything else that our patients are stranded. So we're in the process of building up that safety stock right now. I would say our launch on that is literally right around the corner. Very close in terms of being able to launch into Remunity. And so I think the attraction there is you've got basically 21st technology, right? If you think about the MS3, the current sepsis pump, I think that pump's 25 years old. So it's got -- it's a sleeker profile, it's slimmer. I think it's going to be more attractive to patients. It's got some additional safety features. And just kind of a little more precision around dosing that I think will make it a more attractive alternative to patients. And I think in light of that, I think there's an opportunity that -- while this version of Remunity doesn't address the side pain, that's going to come later with RemoPro. I think there's going to be some attractiveness there that's going to allow us to pick up some gains in terms of Remodulin patients. So we'll launch that after the first of the year. I think our expectation is that initially, Remunity patients will probably be re-skewed more towards new starts versus transitions, though we expect we'll get some transitions. I think everything I just said about sort of the differences between Remunity and generic and doctors not wanting to mess with patients that are doing well, that applied there. Probably applies here with respect to pumps. And so I'm not sure that there's going to be a huge rush out of the gate to switch patients that are otherwise doing well over to Remunity. If they want to do that, that's great, we can totally support that. We're not going to force that. I think as they gain experience with their new patient starts and as other patients -- and the patients that are on the MS3, see the benefits of the Remunity pump, they will eventually want to switch over. And so I think that will come, but it's not something that we're going to force out of the gate.

What would be the reason not to, if you're a clinician or patient, making a decision. I just -- I mean I know like when we gave my daughter, a hand-me-down iPhone 6, she wanted to upgrade that thing. But in terms of, you have...

Yes. I think it's interesting.

I mean just enjoy your silver subcu. Why wouldn't she want a hair station? Why wouldn't she want to upgrade to the modern pump?

No. I mean I think the -- there will certainly be patients that will want to do that. And like I said, we'll support that. I think conversations and talking with physicians, I mean, some of the feedback I hear back is that they -- the struggle with PAH is such a struggle, right? And if the patient gets to a point where they're feeling good, they feel that like they have it under control, there's going to be reluctance on the part of some to say, like, I just don't want to -- I don't want to mess with that, right? I don't want to -- it took me forever to kind of get to this point, I'm feeling good. They may not want to switch right away. But then I agree with you. I think there will be a lot of patients that look at that and say, yes, this is like the new iPhone. I love that. I want to switch over, and we'll certainly do that.

Okay. And then just the other kind of pump thing that we've been talking about for probably sometime is the ISR, the Medtronic implantable pump system. Just in terms of -- actually, where do you kind of -- just if you want to just frame briefly. I've always thought that was a really interesting opportunity. And I think that's something that still comes up with in our investor conversations. But where are you at there? And I guess has the delay to market has -- how is the physician feedback? Obviously, I'm sure there have been people that are disappointed that isn't available now, but how has that changed? Obviously, awareness must be higher than it was before, but is there still enthusiasm for it out there?

There's a lot of enthusiasm. I think there's a lot of enthusiasm, a lot of frustration. I think fortunately, I think the physician and patient community, understand the issues. They understand we're working on it. And to be honest, I think the FDA has -- they have some legitimate questions to ask. We're trying to -- we feel like we have been addressing them or continuing to address them, and we are making headway there. So in terms of ISR, we're still looking at a 2021 launch. We still have this last condition of approval that we need to overcome, which is -- has to do with the service life of the pump. So you probably know that the SynchroMed II was approved for use of baclofen. It's got a 7-year service life with baclofen. We had some patients in the delivery study, which was the ISR study, where the pumps stalled after about 4 to 5 years. And so that just prompted, I think, rightly so, some questions from the FDA around the pump life and what's going on here and how do we address it. And so we're working through that. And I think we've -- we're in a good position right now. The last thing that the FDA has asked for is this patient preference study, which would basically just, I think, lay out for patients sort of the risk-benefit of the pumps. And pending that, we think we'll be good to go next year. So we are on the verge or maybe as of today, have sign off from the FDA on the survey protocol. We've already started recruiting for the survey. So we just have to get the survey enrolled. We have no -- I mean, we have 100% confidence that the results are going to come back overwhelmingly positive because the patients are clamoring for this. And so we just got to get that logistical piece done and get it back in front of the FDA. But we think that will happen early part of next year and then kind of mid-ish, kind of second half next year, we should be able to launch. And so in the meantime, we have been out talking to the institutions, not just the clinical sites, but other hospitals, other institutions that want to do implants, and they want to have patients on the ISR. And there continues to be, like I said, just a lot of excitement around that. So we're looking forward to launching it next year.

All right. Let's turn to some Tyvaso topics. I guess before I ask you about increasing the impact from that, and I think that's obviously top of mind for a lot of folks right now. I want to ask you about the Technosphere Treprostinil BREEZE study. And kind of just -- of all the things that are kind of going on over the next year or so at UT, where does this rank in terms of the kind of long-term value impact? It seems pretty important to me. I'm just curious how you think about it.

It's up there, for sure. I mean it's hard for me to talk about that without being able to talk a little bit of that increase. But I think if you kind of think about Tyvaso, it's so well positioned right now to be -- very quickly, to be our largest product by far. And so I'll just -- again, on increase, you're talking about a 30,000 patient conservatively market population, that's a virgin market, right? No approved therapies, and the other systemic drugs used to treat pulmonary hypertension are contraindicated. So you have just sort of that kind of blue ocean to play with. And we'll be able to capture a lot of those patients with the current nebulizer. You throw in a DPI which improves the convenience by many, manyfold, I think it just exponentially increases the rate of growth there.

There's a bunch of topics here that are going to get mixed together. Let's step back and go with increase, and then let's move forward to. But when you talk about -- so you said something on increase right there, a 30,000 patient market. Other products are contraindicated. When we talk to -- this is the most -- one of the more shocking things about is, when we talk to clinicians, and I'm sure you frequently come across this as well, there's pretty common use of PD5 inhibitors in this market. And how much do you run into that? And how much resistance do you think there is to Tyvaso? Or how much is that -- that is a competitive feature in your mind? Because obviously, Tyvaso is the one product that has data in this indication, presumably, we'll have a label in the next year?

Yes. I'm not too -- we do run into a little bit of that. I think if you think about it from a long-term perspective, I'm not terribly concerned about it, right? I think now that we started to socialize the increased data at health care conferences, at advisory board, other medical forums. And I mean the feedback and the response to the data is just -- it's overwhelmingly positive. And we've not seen anything like it in United Therapeutics. And so I think as this data gets out into the mainstream, as doctors become more proficient at diagnosing pulmonary hypertension and ILD, Tyvaso is going to be their go-to drug. And then certainly, again, you layer in a dry powder inhaler, right? With that, it's -- I think it's a pretty simple cell, right? I mean, you've got a device that fits in your pocket, fits in your purse. You do it 4 times a day, it's 1 to 2 breaths. It's much easier and much more convenient than the current nebulizer. So I think as I just kind of think about it over the long term, I think the opportunity there is huge.

So there's some use of Tyvaso that probably already goes on in that group 3 population. There's a lot of untreated patients in that population. There is some patients being treated with other products like PD5 inhibitors, generics, sildenafil, things like that. When you think about kind of the segments of kind of lower-hanging fruit, I guess, is it driving diagnosis? Is it that there's diagnosed people that aren't being treated? Is it these patients on sildenafil, tadalafil? Is it -- I know you guys have talked about expanding your sales effort. Is that getting rheumatologists to get these patients screened that maybe have underlying RA or scleroderma or things like that? What are the factors that are going to kind of drive the first wave or two of growth?

Yes. I think it's going to be diagnosis. And so we decided to and are in the process of expanding our sales force by about 50%. And through that, we'll have a sales team that is focused exclusively on ILD. And there are some rheumatologists. There's a lot of pulmonologists that are treating these patients. And so job one is getting out and educating on how to screen, how to diagnose and that process has already started. And I think -- and we talked a little bit about this on the earnings call a couple of weeks ago, we're going to -- you need a right heart cath, as you know, to definitively diagnose pulmonary hypertension. Very few patients have undergone that test speak for another reason, then like what's the point, right? Why would -- as a physician, are you going to put a patient through that procedure when there's no approved medicine, right, for the -- even if you suspect pulmonary hypertension. That's going to change. We know that's going to change. We're hearing that's going to change as we're out talking to these physicians. And so it's just getting the awareness around what's going to be required to write Tyvaso. And then within their institutions, deciding whether they're going to do that themselves or they going to turf it over -- turf the right heart cath over to the pulmonary hypertension clinic or what. But I think once we sort of get over that hump, the patients are certainly there.

And then so we'll bring it back full circle to BREEZE. What's the current plan for how you'll communicate? I guess you've kind of, in the past, may have talked about filing the NDA there in the first half of '21. Will there be some sort of data update? Or will there just be some sort of announcement that you've filed? If it's successful, that will be the indicator that it was successful. How will we be able to assess that as investors what that program kind of looks like from a PK perspective?

Yes. So...