United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Good morning and good afternoon. This is Eun Kyung Yang a biotech analyst with Jeffries. So next to presenting companies, United therapeutics, it's one of your fireside chat. And presenting from UTHR is James Edgemond, CFO. James, thanks for joining us. But before we start, Dewey is going to give us a disclaimer. Dewey?

Yes. Good afternoon. 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. And thank you. And so I'll turn it back over to you, Eun.

So James, why don't we start with a quick overview from you, then we can go in Q&As?

Yes. Eun, thank you, and thank you for the invitation to the Jefferies Virtual London Healthcare Conference today. We really appreciate kind of the invitation, the opportunity to connect again. It's the second time for you and I this year. And we've had some really good conversations throughout the day today. So really thank you for that. And as you already noted, I'm joined today and will be joined today in our fireside chat by Dewey Steadman, who is UT's Head of Investor Relations. So he'll be available too for any questions as well. So just as a quick kind of overview, Eun, and thank you for the opportunity before we jump into Q&A. From a third quarter perspective, where we just reported and a follow-on from that earnings release, it was a very good quarter for United Therapeutics. We had excellent growth in Tyvaso and Orenitram. And I also wanted to touch on a couple of things about key milestones, really, going forward for us. We've had a lot of questions today around what is next for United Therapeutics. And then just to touch on a few of those going forward. And I know we're going to spend some time in the next 30-minutes talking about it. But 5 items, I think, are worth to bring up are really the INCREASE clinical trial results. That, as you know, are currently under FDA review, and we're going to spend a few minutes talking about that. The next is Remunity, which is really a new approved pump platform for subcutaneous delivery of Remodulin. It is approved as well and launch preparations are really underway for that. And the implantable system for Remodulin is another surgically-implanted Remodulin pump that will deliver medicine right to the pulmonary bed. We anticipate launching that in 2021. And we're also going to spend a few minutes, I bet, on BREEZE, which is treprostinil Technosphere, which is our license agreement with MannKind Corporation and our dry powder inhaler. And there's probably a couple of things we want to touch on in terms of where we are in that process. And lastly, really the ralinepag advance studies, which are an IP receptor agonist, and these are 2 studies that are 1 that's on the cusp of launching and 1 that has already been launched, with ralinepag, which was the in license agreement from Arena. And again, we're excited about those 2 studies, which is really a new biologic and new chemical entity for us. It's in that platform, but a new chemical [indiscernible] PAH. But I would say those are certainly key milestones to think about for UT going forward. But with that, I'll turn it back over to you to run through some questions that may be of interest for you or some of the investors out there.

Yes. Thank you, James. So for the third quarter, it's a good quarter. And one thing was very noticed -- noticeable was strong, Tyvaso sales two quarters in a row. And although you guys mentioned the majority of the sales came from the approved indication, PAH. But a post positive Phase-III INCREASE data, the street assumes that there must be increased off-label use. So the question to you, I know you don't really promote off-label use. You haven't really disclosed what the off-label use is or the Tyvaso has been. But after the data, because the patients who are treating PAH the patients, the physicians that are treating those patients are overlapping with the PAH patients. So after the past, they will face the INCREASE data, can you share with us what have you been hearing from the medical community about the potential of a PH-ILD indication? Also, what's the kind of a current diagnosis rate? And once the drug is approved sometime next year, hopefully, April. Do you think the diagnosis array would go up, so the actually potential number location could increase?

Yes. Thank you, Eun. Great question. There's a couple, I guess, questions embedded in there. And so let me try and tease them apart. So Tyvaso, as you mentioned, had a great quarter, really 2 consecutive quarters. I would say a strong revenue growth. And if you reflect back on just the September 30 quarter, it had approximately 17% year-over-year growth. As you mentioned, we don't promote off-label use, and we can't really track off-label use for Tyvaso. The data that we get in very de-identifiable form really doesn't give us any visibility other than to PAH treated patients where Tyvaso is currently approved and WHO Group 1. That said, there could be PAH centers, of course, that are prescribing Tyvaso to PH-ILD patients. But right now, we only cover about 25% of those potential PH-ILD prescribers with our current sales force. It's also important to note that there were prior trials in this space. There were for systemic PAH agents that were unsuccessful. As such, going into this INCREASE trial, some of the medical communities saw a very little chance of success and what we believe was an opportunity for success in a very underserved market. And one other point really on the Tyvaso, your -- first part of your question, I think, in a couple of questions. Is that there could be a possible, what I would say, halo effect for Tyvaso. The clinical trial results for INCREASE were very strong, right? It hit its primary and all secondary endpoints. And that could have reconfirmed to some prescribers of really, the benefits of Tyvaso, but it also could have rekindled interest from those that didn't prescribe Tyvaso and really to relook at it for the benefit of PAH patients. Again, all we get visibility is into really, PAH patients, but there could have been this kind of halo effect across Tyvaso. Now I think the second part of your question, and correct me if I'm wrong, was really around the opportunity.

Yes what is the diagnosis rate? About PH-ILD.

Yes. So again, as I mentioned, really successful, really excited, INCREASE clinical trial results that really was the first pivotal clinical trial to show a benefit in patients with PH-ILD. As you know, and maybe for those who are just new to the story, interstitial lung disease, or ILD, as I referred to, it is really a significant scarring of the lungs. It's often complicated by pulmonary hypertension, PH or high blood pressure, the lungs. But with that background, let me transition really to get to the heart of your question around opportunity. And one thing I'll compare it to is the existing PAH space. So we see today around 45,000 patients in WHO Group 1 PAH. They're being treated with over a dozen therapies in the current market. We estimate in WHO Group 3, which is PH-ILD, that opportunity to be about 30,000 patients in the U.S. where currently, as you know, there's no approved therapies for use to be treating these patients in WHO Group 3. And so we think with Tyvaso, if it's approved, we're looking to increase significantly, the number of patients that are prescribed Tyvaso. And just to follow-on with that, just to give you another sense of some of the trials when we think about opportunity. We also have the PERFECT clinical trial or study that was started, it is paused. It should restart very soon. But that PERFECT trial for pulmonary hypertension associated with COPD. That's under investigation with our PERFECT trial has a potential opportunity, we think, of about 100,000 patients that currently have no approved treatments for therapy. In addition, we're also pursuing opportunities in idiopathic pulmonary fibrosis, IPF outside of PH in our TETON studies, which could be an additional approximately 100,000 patients. And these patients currently have 2 treatment options that are considered really, maybe imperfect solutions by the medical community. But -- so just to give you a sense of where we frame the opportunity, not only in PH-ILD, which we think is significant, but also in these other indications that we're continuing to study.

So if we think a PH-ILD, you said about 30,000 patients in the U.S. So given the fact that there is no approved drug, and once the drug is approved, you guys have mentioned on the third quarter earnings call that you're going to be increasing your sales force, primarily focusing on PH-ILD. And realistically, what kind of penetration that you could achieve at peak? Out of 30,000 patients.

Yes. Thank you, Eun. So let me kind of frame the question. So Michael Benkowitz, in a prior earnings call, I think, talked a little bit about his plans to increase the sales teams to address this new opportunity. And so let me kind of frame up maybe a little bit of a response relative to some prior discussions. But for PAH, we currently call on about 4,000 to 5,000 doctors. However, 80-plus percent of PAH patients are concentrated in about maybe half of those physicians. So we focus our efforts accordingly there. For PH-ILD and specifically that opportunity, we estimate that there are about a 25% overlap with our current call points, however, the number of treaters and concentration of patients is very similar, we believe, at this point to PAH and the research we've done. The other thing, maybe 2 things I would say is from a budget perspective, when we think about the SG&A and the costs associated with increasing the sales teams. We do still kind of apply and apply consistently the budget algorithm around 50% of prior year revenue really determines what we spend on an annual cash operating basis. So even with the increase of this opportunity in our sales teams, we're still going to be within our historical budget normal algorithms, where, again, we don't spend more than 50% of prior year revenues on our cash operating budgets in the next year. So it's just kind of a governor for us. And the last thing I would say, really, if I can add on one last thing, with respect to our hiring plans for PH-ILD, is that we're approaching this really around an April PDUFA date, right, for the Tyvaso sNDA. And as such, these hiring efforts that are ongoing and expected to be ongoing will be completed in the early part of next year. So that hiring ramp is kind of this year and going into next year in terms of scaling up to address the opportunities and new call points for PH-ILD.

I see. So PH-ILD, so you mentioned that there is a 25% of physician will -- between PAH and PH-ILD. So when you target the other 75% of PH-ILD triggered population. Then do you the PH-ILD is a little bit more diffuse to patient population in terms of distribution? Or they are also in the concentrated centers that you can effectively focus with about 25% increase that we do in FDA.

Well, based upon the research so far, Eun, in terms of how we're going to structure this additional new sales teams. We believe it represents kind of what our experience has been around the existing PAH physicians and the prescribing physicians in terms of concentrating our efforts there. Obviously, if there's an opportunity where additional sales teams are redirecting some sales teams from this going in assumption. I'm sure Michael and the sales teams will want to make a pivot to that kind of opportunity. And certainly will do so accordingly. But we think at the moment, it kind of overlays how we're seeing the PAH prescribing community at this point.

I see. Okay. So do you think the last two question on PH-ILD, do you think that you would have FDA panel prior to approval?

I do not believe that we will need FDA panel prior to approval. I know Dewey is on, and maybe I can just check with him in terms of maybe his experience.

Yes, there was no mention of the need for an advisory committee meeting in the acceptance letter that we received in August.

Thanks, Dewey.

Right. And then, James, you mentioned TreT [indiscernible] is a dry powder formulation device combo. So I think on the third quarter earnings call, you said that PK studies to completing analyzing the data and Phase III study BREEZE switching study is underway, potentially completed by end of this year. So obviously, strategic focus on the data. Would you say in terms of the data timing and then how you released the data, would you release the PK data once they analyzed? Or would you combine the data with BREEZE data when it's available.

Yes. Thank you, Eun. It's a great question. It's a program that we are incredibly excited about, and especially with our partnership with MannKind -- sorry, license agreement with MannKind regarding the TreT technology. So let me kind of answer your question and give a couple of points to kind of frame this opportunity that I said we are incredibly excited about. The first is, I'm glad to share kind of with you and announce that the BREEZE study has been fully enrolled at this point. So we expect last patient last visit sometime in December 2020. So I can say today with you that it has been fully enrolled, and we're really excited to share that with you. And as a reminder, just for those who may be new to the story, the BREEZE clinical study is evaluating the safety and the pharmakinetics of switching patients, PAH patients from Tyvaso to Treprostinil Technosphere. Also as a reminder, and you mentioned this, the pivotal pharmacokinetics study, which has been already completed, and we've talked about this, is the second clinical study in healthy volunteers to compare the pharmacokinetics of Treprostinil Technosphere to Tyvaso. So we'll spend the weeks following the conclusion of the BREEZE study, analyzing the data from BREEZE as well as a healthy volunteer PK data. And we're still on track for an NDA submission in the first half of 2021. The FDA has indicated a couple more points, but the FDA has indicated that these 2 studies, if successful, will be the only clinical studies that are necessary to support FDA approval. We also expect the stability work to be done by the end of the year. And one item, I think that's important to note, is that we expect the Tyvaso DPI packs, so which is used with TreT, will be refrigerated prior to use but can be stored at room temperature for up to 2-weeks before used by the patients. So when you think about the BREEZE study, there's really 3 components we've been working on, which is the BREEZE clinical trial, the PK study as well as stability. And I know that MannKind is working on a human factors test as well. But we're really excited about this program. And as you can tell, even within COVID, the teams have made tremendous progress. I mean, it's really a testament to the commitment and dedication of, what we call Unitherians, our employees within UT, to be able to really get through and fully enroll this BREEZE study, which is important to the program and ultimately, the filing overall. So really, really, really good news.

Okay. So filing is for first half of next year, but when do we begin to see the data before the filing when the study is completed and data is analyzed?