United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Hi, everyone, and thank you for joining us at Cowen and Company's 41st Annual Healthcare Conference. I'm Joe Thome, the senior biotech analyst on the team. And it is my pleasure to have with me today the team from United Therapeutics, Mike Benkowitz, President and CEO; James Edgemond, CFO and Treasurer; and the Head of Investor Relations, Dewey Steadman. To kick things off, I will turn it over to Dewey, who has some forward-looking statements to announce.

Hi, 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. Thanks, Joe.

Great. And Michael, just to start with you. Definitely been a lot of progress over the past year at UT. If you could just summarize some of the high level points and maybe what should we be looking for over the course of 2021?

Yes. Thanks, Joe. Thanks for having us. It's good to be here with you. Yes, it's a really exciting time at UT. I think, as we head into 2021, we're really, really starting to, I think, we'll reap the rewards or reap the fruits of the labor that we put into our pipeline over the last few years. I think as we kind of look into 2021 and out to the future, yes, I think we're positioned to help conservatively 10,000 patients in each of 3 areas in the 2020s, and just kind of go through that real quickly. I think in the first 10,000 patients, we're looking at kind of our PAH business, where we've been playing for the last 25 years. We're already helping about 8,000 patients today. And we think we're going to continue to grow that, leveraging new clinical data such as our FREEDOM-EV data with Orenitram and our new delivery devices, such as Remunity, the implantable system for Remodulin and Tyvaso DPI, that easy administrative burden associated with process cycle therapy. And then we're even situated to even bolster this with a once-daily IP receptor agonist, which is our [indiscernible] drug, our once-a-day formulation of Orenitram and a pain-free version of Remodulin. And I think if we look at the second 10,000, right, this is what we're really excited about is our entry into the PH-ILD space, is where we believe that there are at least 30,000 patients and where Tyvaso, if approved by the FDA in April, will be the only approved therapy for these very sick patients. And then the third 10,000 is an IPF, where there, you've got 100,000 patients with no approved disease-modifying therapy. And what we saw in our increased study for PH ILD is one of our exploratory endpoints was looking at forced vital capacity improvement in patients on Tyvaso. And based on the improvements we saw in this endpoint or in this study and some of the published preclinical data we've seen looking at the antifibrotic effects of treprostinil, we think Tyvaso may be an effective therapy for these patients. And so we've launched a Phase III trial that we call TETON, and that's -- you're starting to recruit sites now to evaluate this. And so that's really pretty exciting. The other thing I'll add is that, in addition to all this, right, still another 10,000 potential inhaled treprostinil patients with our -- in PH-COPD, which is another 100,000 patient population with no approved therapy. And so I think you know we're evaluating Tyvaso in this group of patients, and our PERFECT trial, which is based on a small pilot study that Dr. Waxman at Brigham and Women's in Boston did. So that's sort of like the macro view. And as we think about like key goals for 2021, it's really executing on the 4 potential product launches, assuming timely FDA approval. So we've got Remunity, which we launched last month, and that's going well. And then Tyvaso in PH-ILD coming hopefully in April. The implantable system for Remodulin later this year, and then Tyvaso DPI by the end of the year, assuming our filing in April.

Perfect. And if you could talk just a little bit about the Remodulin dynamics that you've been seeing. It does seem like the company fared pretty well during the COVID-19 pandemic, but any recent changes or how that's going to go forward in the next several months? And if you do want to touch on the Remunity launch, kind of where does this fit in the treatment paradigm for patients? And how are you marketing this asset of the launch?

Yes. So yes, I think in terms of the Remodulin business as a whole, to your point, I think it's held up our U.S. business, in particular, has hold up really well in the face of additional competition. We did experience a little bit of a dip early on in the middle of COVID. And I think that was really just more a function of patients not being able to get in to see their physicians. So we saw a dip in new patient starts there for a couple of months, but that rebounded pretty quickly over the summer. And as we got into the fall and the winter and now, we're from a start perspective, we're back up to where we were pre-pandemic, which is good. And our patient counts remain -- in terms of patients on-therapy remain at or near all-time high. So that's really positive. We think there's growth ahead of us in Remodulin. So you mentioned the Remunity pop. We're really excited to have been able to launch that last month, as I talked about. Very pleased by the initial enthusiasm and excitement that we've seen among physicians. One hospital out in California, our team went in a couple of weeks ago to do an end service and met with the physician, met with the clinical coordinator. And the clinical coordinator was just blown away and said, "I'm giving all my patients on Remunity as quickly as possible." I would like to think that's how everybody is going to respond. I'm a little more practical, I think is -- that's probably not going to be the case across the board, but I think that's indicative of the excitement. And we have seen a lot of enthusiasm in some of the other accounts. So we're really excited about the potential for Remunity. And then I think with bringing on the implantable system for Remodulin by the end of this year. And then like I mentioned, the pain-free version of Remodulin, what we call RemoPro. Over the course of the next couple of years, we feel like there's a real opportunity to grow the franchise as we move into the 2020.

And can you just remind us on the ISR, the time lines that you are expecting? I know you said maybe towards the end of the year. What remains to be done there? And any additional details on that program?

Yes. I mean, so I think what we've talked about is that when the Medtronic pump was approved back, and I think it was 2017, there were a few conditions of approval, handful conditions of approval that the FDA asked Medtronic to resolve before we launch. So we're down to our last item. We and Medtronic are continuing to engage with the FDA. And as I said, I think we're optimistic that we're going to be able to resolve that, here shortly resubmit. And like I said, we're targeting being able to launch this by the end of this year.

Perfect. And then maybe switching over to Tyvaso. Tyvaso had a really strong year, potentially supported in 2 different ways from the February 20 data of -- in PH-ILD, both for just increased awareness of the product itself, but maybe a little bit of optical use. We're looking for a formal expansion in April. Maybe what are you guys doing now to prepare for this launch?

Yes. So we're -- several things. So first thing is that we -- we've decided -- we realized that we need to expand our field team. So our sales representatives, our medical science liaisons. We have a group of -- we call regional nurse specialists that actually work closely with physicians and the clinical coordinators to educate on how you start a patient on Tyvaso, how you titrate, how you manage side effects because these drugs can be complicated. And so we provide that additional support. So we expanded that group by about 40%. And then we've kind of restructured how we're focusing those teams. So prior to, we had -- everybody really cut focusing on all 3 products in PAH. So now we've got a group of sales representatives that are focused exclusively on promoting Remodulin. So with the new pumps, Remunity ISR, as I mentioned coming, we thought it was important to have a group of representatives focused exclusively on Remodulin. We have a group of sales reps that are focused on Orenitram and Tyvaso within PAH -- Group 1 PAH. And then we have another group that's going to be focused exclusively on the PH-ILD indication. And so that expansion is complete. As it relates to PH-ILD, we've been in the field since the fall, educating this group of prescribers, which are predominantly a new group of prescribers to us. So there's some overlap, but not much. And so it's a new group of prescribers, a new call point. So really just sort of educating them on how to screen for pulling hypertension. And's then what are the diagnostics that you need to do with the patient in order to eventually confirm a diagnosis of pulmonary hypertension, which is going to be required to be able to start a patient on Tyvaso. So that's the work that we've been doing. And a lot of really good feedback from the physicians. I think they're excited about having a treatment for these patients that are very, very sick, and we're really looking forward to a successful launch in April.

Perfect. And we actually just come off the pulmonary panel and the physician there was really enthusiastic about the PH-ILD opportunity, saying there's been a ton of failures here and really there's nothing else out there. Can you talk about maybe the data package, any high-level points that you want to emphasize that you think are most impactful and really just what's the size of the unmet need in this subset?

Yes. So I think in terms of the data package, I mean, to your point, I mean, I think you're sort of [indiscernible]is something that we've just heard consistently that I think the physicians are really, really impressed and really enthusiastic about the data package. I would say, yes, I think, as you know, the INCREASE trial hit all of that's primary and secondary endpoints. It's -- I think, the cleanest trial we've ever been run at cleanest outcome we've ever had in a trial at United Therapeutics. So we're super excited about it. We're very, I think, honored to have that data published in the New England Journal of Medicine. That's another first for us as a company. I would say in terms of the things that we hear from physicians as being most impressive in the data package. It's certainly the 6-minute walk distance improvement, the increased time to clinical worsening and then the reduced risk of exacerbation of the underlying lung disease. So that's kind of what we hear consistently that they're -- I think they're most impressed with. I think there's others -- in addition to that, there's -- I mentioned the TETON study earlier, but I think that exploratory endpoint regarding FVC, or Forced Vital Capacity, is also, I think, very, very intriguing to a lot of physicians. So we're really excited about it. I think in terms of the market opportunity, we've been saying consistently, we think it's at least 30,000 patients. I think as we continue to talk to physicians and KOLs, I think we're hearing that, that may actually be on the conservative side. As the ILD progresses in a patient, the essence of the patients getting pulmonary hypertension continues to increase. So it could be significantly more, but even at 30,000 patients, I mean, that's a market that's almost the same size as PAH. In PAH, you have 14 therapies, and in PH-ILD, we have 0. So we're really excited about that virgin market opportunity for us and then really being able to, like you said, bring a treatment to patients that have nothing right now and are really, really sick.

And maybe you could go into a little bit the diagnosis that needs to occur here. I think you expect that will need to have a right heart catherization in order to get the patient, Tyvaso, in this subset. Maybe are physicians doing the right heart catheterization to confirm disease because there are no available therapies out there? Maybe how is this diagnosis going? And maybe what sort of changes you will implement upon initial launch?

Yes. So as I said, I think a lot of the work that we're doing right now is around educating, around screening these patients early because oftentimes what happen -- I think about what happens now is at some point, the PAH gets so bad that it's obvious to the physician. "Okay, they need to do something," and that's where they may, in some cases, decide they want to refer them over to a PAH clinic, right? And then -- again, there's no approved therapies, but maybe those doctors are experimenting with some of the systemic drugs or maybe even using Tyvaso a little bit off-label. We don't see a lot of that, but there's a little bit of that, right? So the key right now is really getting -- conditioning the physicians to start to screen for this at the time of the ILD diagnosis and along the way, right? They start to look for some of those indications of development of pulmonary hypertension. And when you see that, right, do an echocardiogram and then based on what you're seeing there, refer over to a right heart cath. We do expect that a right heart cath is going to be required in order for the insurance company to cover it. And so that's just -- again, it's just -- it's new to these ILD treaters. So it's just something we have to educate them on and explain to them that this is what they're going to have to this is part of the diagnostic procedure in order to get coverage. We don't think that that's done typically, to your point, not done frequently now because there's really nothing on the other side of the right hard cath. So why put the patient through invasive procedure when there's no approved therapy? So that will be something that's required in order to start on Tyvaso.

Perfect. And then maybe we can go over to the Tyvaso DPI. We saw some initial data earlier this year. Maybe if you can just recap what you saw here and the progress towards submitting the supplemental application for the DPI in both PAH and PH-ILD?

Yes. So this is, I guess, 1 of our 4, hopefully, launches this year. We've completed all the clinical work. We've completed the manufacturing work. So what we're doing right now is working on our submission to the FDA. And our goal is to get that in, and we're on track to do this. Our goal is to get this in April after we hear from the FDA on PH-ILD. And the reason we're waiting to submit after that is the FDA has told us. But if we do that, we would not need to do a second study with the DPI in ILD. And so the DPI approval, if it comes, would apply to both PAH and PH-ILD, which is really cool. We're really excited about that because we were originally thinking that we were going to have to do a second study, but it doesn't appear that, that's the case. So assuming everything goes well and we -- no hiccups with the submission with the FDA, and we're able to launch by the end of the year, we'll be able to launch into both PAH and PH-ILD at the same time.

Perfect. And then in PAH for the DPI, where is the sweet spot for either adding the DPI into a patient's regimen? Or are you going to see a lot of switches over from the nebulized version of Tyvaso spread over to the DPI? How quickly do you think this transition will occur? And how are you thinking about the optimal place to put a DPI for patients?

Yes. I think -- well, a couple of things. So I think in terms of how we position DPI, I don't know that, that necessarily changes from the way that we're positioning it now, right? So currently, we position both Orenitram and Tyvaso as your frontline -- first-line process cycle therapy. And then from there, it's educating the physician and talking with the physician about the patient profile and which patients are better suited to maybe starting on an oral like Orenitram or better suited to starting on Tyvaso. I don't think that changes, at least come out of the gate. I think that's going to be our positioning. Now physicians may have a preference one way or another because now that you have a DPI that is going to be more convenient. It's smaller. You're doing one breath, 4 times a day instead of 9 to 12. That may change their thinking about how they want to use it. But from a positioning standpoint, I don't get really changes that much. And then -- so that's sort of the positioning piece of it. In terms of the conversion piece of it, I think that there's going to be a lot of similar to what we're seeing with Remunity or maybe even more. So I think there's going to be a lot of excitement, a lot of enthusiasm around the DPI. And I think patients and our physicians are going to -- they're going to have those conversations with their patients that are on the nebulizer. And so I do expect that for the appropriate patient, they'll transition over fairly quickly, and I think also with new patients as well. Having said all that, I mean, there's still going to be, I think, a market for the nebulizer for the TD-300, and we're going to continue to support that. And for those patients or physicians where that product is most appropriate, we'll have that available.

And I may touch on that a little bit, but you are initiating the Phase III program in CF-ILD. I think the first program is going to be in IPF patients. If you can just talk a little bit about the rate of accrual there that you expect, maybe when could we see some data there? And when you think about expanding the program overall into other patient subsets, how are you thinking about that?

Yes. So I think with the TETON study, which I talked about before, we're -- we started -- I'd say we're in the startup phase or recruiting sites. We -- I think what we've said publicly is we expect to have that enrolled by, hopefully, the end of next year and then data, I guess, at some point in 2023. So we're really excited about that one. Like I said, that's another 100,000 patient population that we'll be able to serve. We are looking at other subsets of the diseases. We've not made any decisions yet on which ones we're going to go into.

Yes. Great. And then maybe we can switch over to the oral franchises for PAH. Maybe how is Orenitram growing? What did you see over the past year to 18 months after we saw some initial or additional data from the program? And maybe where do you see that going over the next 12 months?

Yes. So I think we've been really happy with the growth, the double-digit growth that we've experienced in Orenitram, certainly, over the last year on the heels of the FREEDOM-EV study and label expansion -- label update based on that data. So I think it's -- you got a lot of excitement and interest in that. And a lot of -- I would say, a lot of physicians that had initial experience with Orenitram that maybe was not great that are now coming back and starting to take a look at again. And not only take a look at it, that start their patients on Orenitram and have really good experiences. So it's been really nice to kind of see that happen. I think the value proposition for Orenitram is really, really strong. I think between the EV data and some recent health economics and outcomes, research data that we've put together, I think we've got -- like I said, a really strong value proposition around being able to delay disease progression with a 61% reduction in risk. A positive impact on survival with a 37% reduction in risk of death versus the placebo. And then from an economic perspective, a 60% lower PAH-associated health care costs relative to selexipag. So yes, I think a lot of really positive things that we're seeing in not only EV data, but some of the subset data that we've done. And we've got a registry for Orenitram, we call the ADAPT Registry, which we're going to start to be able to generate data and some publications and some additional buzz around Orenitram. So we're very excited about a lot of Orenitram and its performance and look forward to continuing to add into the future.

Perfect. And I know you indicated that you -- similar to how you're positioning it now and have a DPI or Orenitram be sort of the first option for prostacyclin. Do you expect when a DPI is launched that you'll have any patient switch from Orenitram over to the DPI? Is it something that, I guess, you're promoting in any way or expect to see?

I don't think we're going to promote transitions. Certainly, not for patients that are doing well in Orenitram. I think if you have a patient that's on Orenitram and for whatever reason is not, they can't get up to an effective dose. They're maybe struggling with some of the side effects. I mean, I think that's certainly -- that would be sort of our kind of expects the best option in that case is go to the DPI. And then again, like I said, we're not going to -- I don't think we're going to necessarily change how we position it. But I think the doctors may decide and their algorithm for how they treat the patients, they may decide that they're going to use one over the other.

Perfect. And then maybe jumping over to ralinepag. If you could just recount sort of the high-level data that we've seen so far, maybe what made you excited about the program to bring this one in-house?

Yes. I mean, I think it was the early Phase II data around the kind of safety efficacy. Certainly, the once-daily dosing made us really, really excited about that. And as you kind of step back and kind of think about what we're trying to do as a company is we're trying to provide options at every step along the way of the kind of the treatment journey for the patient. And so we've got the oral parental prostacyclins. We have PD5. I mean it's generic now, obviously. And so I think the missing piece for us is the IP-receptor agonist. And so this gives us an opportunity to play in that base with a drug that is -- should be more convenient to once daily versus twice daily, which is selexipag is. And then beyond that, there's opportunity -- I think, there's other opportunities for differentiation and ways to enhance the value proposition. But that's really, I think, going to be determined of how the trial plays out, right? Is the once daily more tolerable than twice daily? Is ralinepag actually more effective than selexipag? We'll have to see how that plays out in the trial. But we're really excited about that product.

Perfect. And then you did mentioned the Phase III program. There are 2 studies ongoing, one focused on outcomes and the other capacity. Kind of what was the rationale for developing the program this way? Were you looking to find sort of a niche that maybe isn't currently addressed with some of these endpoints?

It wasn't -- well, when we acquired it, these were -- they actually had 3 studies, right? They had the outcome study, the capacity study, and then there was actually a 6-minute walk test study. I think it was called -- I forget what it was called. But I -- so that [ arena ] had set those up, working with the Steering Committee of the typical KOL group that you see in PAH. And so we inherited that and we looked at it. We in doing our due diligence after we acquired it and talking with some of these Steering Committee members, I think we came to the conclusion that the 6-minute walk test was unlikely to be successful. So we ended up as designed and so decided that not to pursue that one. And then I think the outcome study is, I think that's sort of like your typical PAH study now, right? That's your event-driven study. So I think for us to have -- to be able to -- for that to resonate with physicians to be able to, I think, compete with selexipag, we have to do that study because that's the GRIFFIN study. And then the capacity study, I think, was an interesting one around just kind of exercise capacity. And like I said, that was already kind of baked in. And these 2 studies really sort of relate in terms of how they're evaluated from a regulatory perspective. And so decided to continue that.

Perfect. And then in terms of when we could see data from these trials, I know, obviously, the outcomes is definitely harder to predict because it's outcome based, but what are the expectations that you have laid out there? And ahead of a potential FDA submission, do you want to have data from both programs?

So well, so timing-wise, what we've communicated is we expect to have these half enrolled by the end of this year, fully enrolled by the end of next year. To your point, on the outcomes, at that point, we have to wait to accrue events. So we'll see how long that takes. I think we expect that, that will happen sometime in 2023. We do not -- the way this is set up from a regulatory standpoint, we do not need to have both studies necessarily completed before we can submit. We could submit on one individually, I think if the p-value is less than 0.01 and receive approval, but I think we -- my guess is they'll probably end up lying it up together, and those will get submitted together.

Perfect. And it does seem like this would compete with selexipag. You will have several oral options in the pipeline, especially if there is a next-generation Orenitram. So how do you see all 3 of these playing together in the United pipeline?

Yes. As I said -- I mean, I think part of it will depend on the data that we see in the trial, right? And the patient type and the profile of those patients that did well on ralinepag and how that compares with the EV data that we see. So it's hard to give, I guess, give a specific answer to that without having seen the data. But as I said before, if you just kind of think about the progression of treatments for PAH patients, it's PD5, ERA, IP receptor and/or oral prostacyclin, maybe not [indiscernible]. We just -- we want to have an offering in every step along the way. And so it really just gives us an opportunity to have a product that can help a patient wherever they are and then the course of their disease progression and wherever the physician thinks that they're -- whatever the physician thinks they most need at that time.

Perfect. And then in terms of BD opportunities, obviously, you've done a lot of partnerships with its devices and brought, obviously, ralinepag into the pipeline. Kind of how do you see potential additional BD going forward? Is this a focus for the company? And if it is, kind of maybe what areas would you look to go into?

Yes. So I think we're constantly evaluating business development opportunities. We've got a team that's all they do, and they're always bringing things to us. I think we've got a pretty high bar that things have to clear for us to act on. And I think you've heard James talked about in the past that from a capital allocation strategy, our kind of first priority is investing in our own business and our pipeline. Then it's looking at these external opportunities. And then it's -- the third is the return of capital to shareholders through repurchases. So that's not really changed. As I said, we continue to look at things. I think in terms of types of things we're interested in, it's things in our lung disease space. I mean, we feel like that's what we know. Other cardiovascular diseases, such as things that can -- like with PH-ILD and IPF that allow us to maybe expand our footprint in those indications.

Perfect. And maybe just in the last couple of minutes we have here. There is another aspect of the business, sort of this organ manufacturing and focus on organ transplant. Maybe any highlights from that business that you want to share and maybe what investors could be looking for over the next couple of years?

Yes. So I mean, that's progressing and moving along really nicely. I think on the xeno transplantation side, we're doing what we call our kind of 6x6 model with our ten-gene, kind of our ten-gene peg. And so we've got -- I think it's achieved 6-month survival and 6 primates. And the FDA said that sort of a gaining issue to moving to an IND. So we're hoping to get that done this year, maybe early next year, get back with the FDA, and talk about what a clinical trial looks like and maybe as early as next year.

Excellent. With that, I think we are out of time. But thank you very much for taking the time to speak with us today. We appreciate it.

Yes. Thanks, Joe. Good to be with you.