United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Wedbush PacGrow 2021 Virtual Healthcare Conference. Thanks for joining us. My name is Andreas Argyrides, and I'm one of the health care analysts at Wedbush, alongside Liana Moussatos. It's my pleasure to introduce our next presenting company, United Therapeutics. 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] Dewey, do you have any opening remarks?

Yes. Thank you, Andreas. Good morning. Our remarks today may include forward-looking information about our business. And please see our SEC filings, especially Forms 10-K and 10-Q, for risks and uncertainties that could cause actual results to differ. With that, I'll turn it back over to you.

Thank you, Dewey.

Martine, welcome. Pleasure to have you. United has excelled at achieving growth through innovation. Big-picture question to start. What's your vision for the company over the next several years? And where do you see the next phase of growth coming from?

Yes. Thanks for inviting us to participate today and glad to have a chance, Andreas, to have this fireside chat together with you. Our growth is focused on a couple of key quantitative metrics. One of them are to double the number of patients that we currently have on Tyvaso by the end of next year. We just reported that we are well on track for that doubling, accomplishing 1/6 of the way in the quarter since we announced the goal. And then the second key quantitative metric is to have 25,000 patients on our medicines by the end of 2025. And we are also making good progress on that goal. On the growth, to answer that part of your question, will come from a few different market segments. There's one that's called Group 1, pulmonary hypertension. That's the area where we have traditionally been most active. A second area of growth is called Group 3, pulmonary hypertension ILD. That stands for interstitial lung disease. We received an approval from the FDA to go into that area just a quarter or 2 ago, and that's the next big growth area. A third area is called Group 3 pulmonary hypertension with COPD. That stands for chronic obstructive pulmonary disease. We are well in the midst of a Phase III trial that we hope to be able to report out and gain approval in time to make a material contribution to the 25,000 patient goal. And then the fourth area is called idiopathic pulmonary fibrosis. This area actually has nothing to do with pulmonary hypertension, and we're in the midst of a Phase III trial to demonstrate our safety and efficacy of our products in that indication. So we've got these 4 different areas, Andreas, to achieve our goals.

Great. We may touch on those in a little bit. But before we get there, I wanted to talk about the current growth in product sales that we're seeing despite continued persistence of COVID, Q2 saw robust product sales from the treprostinil franchise. Can you explain how the company is maintaining consistent revenue growth even during the pandemic?

Yes. Thanks for that question, Andreas. We are basically doing it by maintaining really close contact with all of the prescribers in the field. And we did that throughout COVID using telemedical type of outreach to everybody, basically Zoom-type of outreach. But we maintain the continuous outreach. We conducted webinars. Everybody knew the latest medical information concerning our products and how they relate to pulmonary hypertension. We also maintained outreach through multiple different channels. There is the sales and marketing channel, which is the predominant means of outreach, but there's also a regional nurse specialist channel, where our expert nurses interact with the nurses in the prescribers' offices to help with the very important and practical logistics of getting newly prescribed patients onto using their medicines in the most appropriate way and alerting everybody if there's any need for alterations in the dosage. One of the most outstanding features of our treprostinil franchise is that our medicines are readily titratable over a very wide range, and that makes it very useful for doctors in treating their patients as symptoms begin to appear. We have a wide therapeutic window in which to up-titrate our medicines. And then finally, we have our scientists and our medical science liaison lesson specialists interacting with the doctors on really a scientific and medical level, helping everybody to understand what are the evolving trends in pulmonary hypertension, what are the newest insights into the underlying biochemical causes and treatment modalities for pulmonary hypertension. So I think that nobody really felt in any way unattended to by United Therapeutics during COVID. And a huge shout out to our amazing IT department, which has given everybody incredible seamless tools to achieve that outreach. But as the pandemic began to ameliorate, and of course, now we've got like outcroppings with Delta and whatnot. But nevertheless, as amelioration began, we were able to get back in the hospitals, in the medical practices face to face with the prescribers. And we've been doing that robustly since everybody has been vaccinated and that sort of thing. I will mention that, at United Therapeutics, we do have a mandatory vaccination policy, in which all employees and anybody entering into our offices must not only be vaccinated, but must present proof of vaccination. Of course, there are a couple of exceptions for unique medical or religious considerations, but the overwhelming majority of people are vaccinated. And that also is crucial for us enabling us to visit hospitals and meet with doctors face to face.

Thank you, Martine. That's flawless execution and preparation. And it's showing itself in the results, the financial results. So let's talk about near-term products and catalysts. You recently launched Tyvaso in PH-ILD. And I know you mentioned trying to -- the goal of doubling patients. Can you maybe provide a bit more color? How are you kind of planning to achieve it? And what are maybe the more near-term goals, if there are any?

Yes. Thanks, Andreas. So our method for achieving that doubling is -- I like it a lot because it's got some diversity of indication involved. So it's not like you're betting everything on one thing. We intend to achieve that growth, first of all, through growth in the WHO Group 1 pulmonary hypertension population, where we already have a lot of patients on Tyvaso, and doctors have been very impressed with the results from the increased clinical trial, even though it was in a different patient population, ILD. Nevertheless, the results were dramatic and impressive, and that has given rise to additional prescriptions in WHO Group 1. In addition to that, we are, of course, penetrating with a completely separate dedicated sales force in WHO Group 3, the ILD population that you referred to. So we have 2 separate sales forces bringing Tyvaso out to 2 separate patient populations. In addition to all that, we are now queued up in terms of the next big milestone that you were referring to for the hopeful approval of our Tyvaso DPI product, which is an acronym for dry powder inhaler. And this is the product we partnered with MannKind. And we were very pleasantly surprised to be able to complete our pre-approval inspection just last week, actually. And looking forward, hopefully, crossing fingers and everything, for an approval in October and then a launch immediately thereafter. So we basically have 4 prongs with which to achieve this doubling: regular Tyvaso, Group 1; regular Tyvaso, Group 3; DPI or what we call Dreamboat in Group 1; as well as Dreamboat in Group 3. So with those 4 different ways, I think that we feel pretty confident. We wouldn't have announced the goal if we didn't think we could crush it, and we do feel pretty confident with hitting that doubling goal.

Great. Great answer. And a nice segue to my next question, which was with the DPI product, but you've answered that you. So let's then look at the competitors who are also going into the DPI space with differentiated mechanisms at least. What are -- how do you see that market evolving over the next several years while Tyvaso is kind of leading the way in DPI?

Yes. I think the market will evolve into a direction of tens of thousands of patients who were previously dying prematurely because the morbidity and mortality pathway of people who have ILD as well as pulmonary hypertension is worse than the people who just have the ILD without the pulmonary hypertension. And as you know, Andreas, up until now, unfortunately, those tens of thousands of people had nothing for them to use and were dying prematurely. So I think there's going to be a renaissance of pharmacotherapy for the people with ILD. And I do not believe that this patient population is going to be able to be treated by any sort of systemic drug because there is this condition called -- the physicians call it V/Q mismatch. It's basically your heart begins pumping more blood than your lungs can handle and oxygenate. And this occurs when you try to treat the pulmonary hypertension systemically. So it will only be through -- in my opinion, through the inhalation pathway, over the next several years at least, that we'll be able to treat that Group 3 patient population. Now what remains to be seen is, will all of that patient population want to use a dry powder inhaler? Or will some portion of that population want to use the nebulizer? There are differences. For example, with a nebulizer, you would take several breaths during 1 session. Whereas with the DPI, you might just take 1 or 2 breaths during that session. However, one of the main side effects of inhaling treprostinil of any sort is a cough. And will that cough be more pronounced with the nebulizer? Or will it be more pronounced with the dry powder inhaler? We're just going to have to wait and see what happens in the market to find out. But whatever the case may be, with tens of thousands of naive patients -- treatment-naive patients, I think that there is going to be more than enough patients for ourselves to achieve all of our goals. And if any other competitor ends up getting into that space, I think there'll be enough patients for that competitor as well.

Do you -- and just a follow-up question -- a follow-up from your answer. Do you see the market expand? And you mentioned expansion, but is it beyond current market estimates? Do you think that you're going to find more patients out there?

Well, it's a great question that you asked there, Andreas. Because in fact, that's almost always the case, especially with pulmonary hypertension because it's a difficult-to-diagnose condition. I mean, ultimately, the only way to really diagnose it is you have to give a patient a cardiac catheterization, which is, obviously, a very invasive diagnostic procedure. And many patients who would complain of the symptoms of pulmonary hypertension such as shortness of breath, syncopic episodes, fainting and whatnot, many doctors can say, "Well, that's just your ILD. That's not something like separate involving pulmonary hypertension." Not every doctor is an expert on pulmonary hypertension. And so no doubt, a lot of the patients who have both PH and ILD are, in fact, undiagnosed. And they're the addressable portion of the market. But are they capturable? We have to be able to identify those patients. So your question really makes me harken back to the beginnings of this pulmonary hypertension area. And I remember when United Therapeutics and Actelion started out in this area, there were only 2,000 or 3,000 patients who were being treated with pulmonary hypertension. Now after the success of our companies and the acquisition of Actelion by J&J, there are something like 50,000 patients being treated with Group 1 pulmonary hypertension. Nobody would have believed that. Nobody would have even believed there were that many patients back when we started. So a commonly cited figure, to get right down to the numbers, Andreas, on your question is 30,000 patients have a PH plus ILD, whereas there are north of 100,000 patients with ILD. So will it turn out that there are 40,000, 50,000, 60,000 patients with PH? We don't know yet, but the -- what happens is, once you start educating a market and you're in the market and physicians start to see the effect of our therapies on other patients, they begin to think, "Oh, that patient should be brought in and worked up to see if they have PH. So this one should." And you almost, inevitably, when you introduce a product, you grow the market.

Great. And we're looking forward to have progress and seeing those numbers continue to grow. Before we get into the next segment, a quick question on Remunity pump. How important is the successful launch of Remunity pump to the Remodulin franchise?

Yes. I think it's pretty important. And the Remunity pump is an amazing breakthrough in the field. Many, many patients, they just like cross their arms and like, "I don't want to go there" when they see the current infusion apparatus. And I can't really say I blame them. I mean their current systems were built and designed in the 1970s. I mean it's like most of these patients weren't even alive then. And it is a lot of rigmarole that they have to go through to handle their infusions. The Remunity system makes all of that so easy and so simple. The feedback that we've received from physicians, nurses, patients, families has been very, very positive. People see this as a paradigm shift in infusion therapy. And indeed, it is the actual technology by which the Remunity pump works is the first new pump technology in over a half century. It literally uses like sub-acoustic sound waves to determine how much Remodulin is in the reservoir and then sends out precise amounts of that Remodulin 10x more precise than with the older technology. And of course, the patients now, instead of having to mix or fill something, they just snap on a cassette and they're off and running. So I do believe that Remunity is a game changer for Remodulin, and it's going to be an important part of the growth story going forward.