United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

All right. Welcome, everyone, to our 30th Annual Healthcare Conference. Credit Suisse. I'm Tiago Fauth, I'm a biotech analyst here at Credit Suisse, and we're joined today by United Therapeutics. We have Michael Benkowitz. We have Dewey, and we have James Edgemond as well. I'm just going to hand it off to Dewey, so he can read some forward-looking statements, language and when we can jump right in.

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

Perfect. As usual, we can kick it off with an intro. So again, fairly interesting here for United Therapeutics kind of rebounding from some lows a few a year and 1.5 years ago. A lot of focus on the commercial execution. So honestly, can you just kind of provide an overview of where the franchise currently stands, where is the current focus for the company and we'll go off from that?

Sure, happy to. And thanks, Tiago, for having us here this morning, and good morning to everybody that's listening. Maybe let me start with sort of big picture, and then I'll touch on each of our 3 treprostinil products. For those of you that are maybe new to United Therapeutics or haven't been following us as closely, as of late, we have publicly communicated 2 commercial goals. We have a long-term commercial goal, and we have a short-term commercial goal. Our long-term commercial goal is what we call our 25x25 goal, and that simply means that we're trying to work towards having 25,000 patients on one of our therapies by the end of 2025. And how we get there is through growth in WHO Group 1 patients, or PAH, via our existing treprostinil products, next-gen versions of those existing products that provide more convenient delivery of those drugs and new chemical entities and technologies. The second market -- second and third markets really are expansion in growth into WHO Group 3 patients with Tyvaso first in PH-ILD, which we launched in 2 earlier this year, and I'm sure we're going to talk a lot about this morning. And then secondly, into PH-COPD, which is a clinical study that we -- is currently underway. And then the last market is through expansion into idiopathic pulmonary fibrosis also with Tyvaso. So that's really, I think, kind of frames our long-term goal. In the short term, what we've communicated is that we expect to double the number of patients on Tyvaso from roughly 3,000 at the beginning of this year to 6,000 by the end of 2022, obviously provided no more COVID-related impacts. And we've consistently said that, that trajectory from 3,000 to 6,000 may not be linear along the way, but we do feel confident that with our new indication in PH-ILD, we will be able to double the number of patients by the end of 2022. So that's sort of, I think, frames kind of the big picture of what we're focused on from a commercial standpoint. As I look at the specific products, let me start with Tyvaso. So in our Q3 earnings call last week, we reported that in the third quarter, which is the second quarter of our PH-ILD launch, we grew the number of Tyvaso patients to 4,000, which puts us about 1/3 of the way towards our short-term goal of doubling the number of patients on Tyvaso by the end of next year. So we're really pleased with how that launch has gone thus far. We do believe we're on track to achieve that goal. And importantly, we see some near-term drivers for Tyvaso growth over the next few quarters and really 3 of those. The first one is approval of the Medicare reimbursement of Tyvaso and PH-ILD. Currently, we did open our patient assistance program to the CMS patients, while Medicare is reviewing their policy provided that those patients meet our eligibility criteria. However, we are hearing through the channel that many physicians are waiting for CMS coverage before prescribing Tyvaso in their PH-ILD patients. So we believe there is some level of warehousing of patients occurring with the ILD docs. The second growth driver is continued growth in prescriptions from ILD treaters. I would say that as we look at the patients that have been coming in since the PH-ILD launch, the vast majority of those writers have been our historical PAH writers. We know a lot of ILD patients sit with the ILD doctors. And so we're really focused on continuing to engage with those doctors and activate them right and prescribe Tyvaso in these patients. And then the final growth driver is the approval of Tyvaso DPI, which we expect by the summer of 2022. We believe that this will lead to Tyvaso growth in both PAH and PH-ILD patients. So now if we turn to Orenitram, we reported last week that we ended the quarter with the highest number of patients on therapy and the highest revenue quarter since approval. And for those of you that have listened to me on our earnings calls just the last couple of quarters, you'll recall that I've said that we launched our FREEDOM-EV label, so the label expansion for Orenitram, really into COVID. And so we saw a little bit of an uptick, but really, I think COVID blunted our launch trajectory because we just weren't able to access physicians and communicate all of the benefits of -- and all of the data from the FREEDOM-EV study. And so we've really been able to do over the last 2 quarters is have more robust interactions with prescribers about these important data and the overall Orenitram value proposition and the reaction and response and feedback has been I would say, very positive. We've seen this translate into new patient starts and continue to hear from the doctors how impressed they are a efficacy of Orenitram as compared to other oral prostate in-class drugs. So we still believe that they're in a lot of growth ahead of us for Orenitram and that it will grow and contribute materially to our 225 goal. And then finally, I'll wrap up my very long introduction with Remodulin and just say that we're -- we continue to be very pleased with the performance and resilience of Remodulin over the past several years as generic competition has entered the market. We do, over the long term, expect this product to continue to not only remain stable, but reflect our growth over time as we see more patients adopt the Remunity Pump. We continue to enhance the dossier of clinical information behind Remodulin, use in PAH, particularly is the ability to help improve a patient's RV function. And then we're continuing to make -- to develop and make improvements to the delivery devices in Remodulin. So we're working on a product we call RemoPro, which is a potentially less painful or hopefully a pain-free version of Remodulin that we think could really be a game changer not only to Remodulin, but for PAH patients.

Perfect. No, I appreciate all the details that you gave us there. So perhaps we can jump right in. I think most of the investor focus has been on the ILD launch so far. And to be fair, there was some initial skepticism on your stated goal, right? And I think a lot of that has to do with just the kind of experts that we were able to source to discuss or we generally spoke WHO Group 1 physicians that did not necessarily have as many patients with ILD. So there was a lot of unknowns there. And I guess a lot of that has to do with the physician population that is treating these patients. So -- where exactly -- how are you targeting that those separate physician populations? What's the relative importance of getting your typical PAH physician versus ILD versus rheumatologists? How concentrator or diffuse is this patient population across the U.S.?

Yes. So I'd say there's really, I would say, 3 groups of healthcare practitioners that we're targeting. So first are the ILD treaters, who typically manage these ILD patients. And this is a new universe of physicians for us. They're new call points, new relationships that we have to form. And we -- I think we put in a dedicated sales force last year to really target these physicians. And so these are the physicians that I mentioned in my intro that we really need to activate and will be a near-term growth driver for us. Secondly, our traditional PAH physicians. I think we know that these PH-ILD patients, some of those reside with the PAH clinics. What we're seeing is a lot of the ILD treaters right now are referring their PH-ILD patients to the PAH clinics. And so we have to make sure that we're staying engaged with those physicians continuing to communicate the increased data, the benefits that Tyvaso can provide to these patients. Unfortunately, the vast, vast majority of these physicians are familiar with Tyvaso. So they're -- getting those -- getting the PH-ILD patients within these physicians started is relatively straightforward. And then the third, and this really, I think, sort of spans the other 2, are the nurses that support both of these groups of physicians. They're a really big focus for us because they're really on the front lines of initiating therapy, managing side effects, helping the patients' dose to -- titrate to target dose. And so we've got to make sure that we're engaged with those practitioners as well. And we have a dedicated nursing team at United Therapeutics that goes out and works with those nurses. So it's really kind of -- it's a full court press on those groups of physicians. I would say, in terms of the concentration of the patients, it's the old 80-20 rule. You've got about 80% of ILD patients. In this case, it's not quite 80-20 being treated by about 30% of the ILD treaters. So it's fairly concentrated actually not as concentrated as what we see in PAH, but still, I think, fairly concentrated.

Got it. And what would be a typical patient journey for some of those ILD treating physicians? In terms of diagnosis, how similar or dissimilar is there -- the diagnosis and reimbursement process and trying to work through all of the back end, issues to get someone on Tyvaso? If you're a Group 1 physician, you have a lot of experience with that already. So I think that process is a little bit more seamless. But how is that kind of playing out in the community setting?

Yes. So I think -- I mean, at a high level, I think the process is very similar, right? You have a different screening criteria that you look for that suspect pulmonary hypertension. Once you suspect pulmonary hypertension, you typically do an echocardiogram. And then based on the results of the echocardiogram, you may refer it for a right heart cath, which is going to be required to confirm the diagnosis of pulmonary hypertension and the payers are going to require that in order to reimburse. And so at a high level, it's a similar process. And as you point out, so for the PAH docs, they're used to this, they're set up to do this. And so moving those patients through that process is, again, relatively speaking, easy and they're used to doing it. So that moves through pretty quickly. In the ILD practices, it's -- this is taking just, I think, a little bit more time. So these things aren't necessarily what I would say, barriers to treatment or barriers to starting its change management. So we're asking them to do things that they haven't done in the past or right? In the past, before we had Tyvaso and PH-ILD, there were no approved therapies. So there was really no incentive or no reason for doctors to screen or screen early, do a lot of the diagnostics that are required to determine if the patient has pulmonary retention. So it's really just continuing to educate these physicians, bring them along. In a lot of cases, these are physicians that are obviously very busy. They use with the same doctors that are on the front lines of COVID, right? So what we're seeing right now is a lot of referrals into the PAH clinics as a result of that. But I think over time, we will -- we're starting to see it too, they're going to start to screen, they're going to screen early, they're going to do their echo. A lot of these physicians are in the community. They don't have ready access to a right heart cath, so they're having to figure out where they're going to send the patients right heart cath. So it's just these logistics that take a little bit of time to work out. But as I said, we're starting to make inroads with these physicians. And I think as we move to the end of this year and into 2022 and even beyond that, we'll continue to see I think, higher levels of engagement, activation among this physician population.

Got it. So despite some of those challenges in your first 2 quarters of the launch, you've made some pretty substantial progress towards their stated goal, right? But you also could have a bolus effect from some warehousing from a Medicare patient population. So as soon as you get that reimbursement, you may actually get some patients that are currently on therapy to commercial drug, plus potentially some incremental warehousing demand. Is that the right way to think about it? Because it sounds like this could actually the whole hockey stick shape launch, it could actually happen probably perhaps at the beginning of next year. How do you see that working towards that 3,000 patients, incremental patients go could that even occur sooner than you expected given how well it's gone despite all the challenges?

It could. I think I'd say a couple of things. So the patients that we have in our patient assistance program, moving them over to a commercial model doesn't happen overnight, so it does actually take some time to kind of work that out. So let's say, we get CMS approval before the end of this year. I think it's probably a 1, 1.5 quarters to kind of roll all of those patients over to reimbursement. I think the -- my sense is we probably see maybe a little bit faster uptick for those warehoused patients, which I can't quantify it because again, it's anecdotal. But again, we do believe that there are patients sitting there waiting for CMS approval. And so I think once we receive the approval and we get the word out, I would expect that we see pretty nice referral flow come in soon after that.

Got it. Got it. I...

And like I said with DPI coming sometime next year, I think that's just another, I think, Acceleron. So it's hard for me to kind of predict when that inflection point happens, but I do believe it's going to happen.

No. Fair enough. It sounds from the dynamic that you're describing that would be the case. And perhaps it is a little too early to call it, but how do you guys feel about your initial estimate of about 30,000 patients, PH-ILD patients addressable in the U.S.? Given your early experience, does that seem about right? Like, there's a pretty broad range in the literature from a prevalence perspective. And not a whole lot of historical focus on that patient population. So how do you guys feel about that number as of now?

Yes. I think we feel good about it. I mean as you point out, if you look at the scientific literature you see that -- I mean, it is a broad range, right? It's somewhere between 15% to 86% of the 230,000 ILD patients in the U.S. are suspected to have pulmonary hypertension. So we've kind of err towards the conservative side of that, the 15% that gets us to 30,000. As we continue to talk to physicians, they tell us that's low, but with 30,000, that's plenty of patients, and so we're really kind of focused on that. So we do feel like that is a good number, if not on the conservative end of things.

Got it. No, perfect. And since you did mention DPI, just a couple of follow-ups there because we do get a lot of inbounds on that. Do you have any -- I mean it's pretty soon, but like do you have any updates on the complete response letter? It seems like the issue is fairly easily addressable. Anything else that you guys can comment on that as of now or just kind of on a wait-and-see pattern?

Yes, we don't -- there's nothing new to share there. I mean, I think for us, we were really happy to see that we received a clean label, right? I mean that's -- that sort of the first thing. This issue that came up kind of came up the 11th hour, but it's -- as you said, I think it's a pretty straight forward issue for us to address. We're in a fortunate position that we think we have a couple of different paths to address it. And we're confident that we can get this resolved quickly, get back in front of the FDA. And like I said, I think we remain confident about our summer '22 or earlier launch for DPI.

Got it. And how should investors think about the DPI? So again, perhaps for a moment, leaving ILD aside because that is a true growth driver of new patients, is there any expansion opportunity for Tyvaso DPI in Group 1 patients? How should we think about that? Is there a trade-off between going to oral sprent to treprostinil versus going on a DPI? Is that actually potentially a growth driver in Group 1 as well? How are you guys thinking about that?

Yes. I do think it's a growth driver in Group 1. I think if you look at some of the data, at least the data that we see through market research and and other sources. What we find is that similar to what we see with parenteral prostacyclin, there are some refuseniks when it comes to inhaled therapy and estimates range from anywhere from 20% to 30% of patients refuse to go on the current version of Tyvaso because they don't want to deal with the perceived burdens of the nebulizer and carrying it around and having to clean it and -- multiple brace 4 times a day. So the DPI, really, I think, addresses one of those issues, right? It's fits in your pocket, it's still 4 times a day, but it's 1 puff 4 times a day. So I think -- I do think certainly within those -- that group of refuseniks, there's an opportunity to grow. I think we think it helps us also move prostacyclin up earlier just because, again, of the convenience of the delivery device. And if you think about the side effects of inhaled therapy versus, say, oral therapy, I think that side effect profile is a little bit better for the patient. And so the physicians on the fence about whether to start a prostacyclin, this may tilt them more towards doing it because you have -- now have a more convenient device with a -- at least to perceived better side effect profile. So we are, I think, excited about the growth opportunity within Group 1. Then you shift into the other indications, and we think that there's just a massive opportunity there. If you look outside of Group 1, if you look at PH-ILD, you look at COPD, if we're successful with our PERFECT study, if you look at IPF, if we're successful with our TETON study, that opportunity just -- that dwarfs what's available to us on Group 1. So we're really excited about DPI.

Got it. But you do have some competition, right, in the horizon for DPI? So I understand you might be limited in what you can or cannot say as of now. But the 2 competitors that come up most often are Liquidia and then Insmed, earlier stage for Insmed. But how should we think about time lines, at least from your standpoint of potential competitors and how they may play out on the Tyvaso launch trajectory in ILD? Can you outline some potential scenarios or some key dates, at least some where we're going to get some updates on the ongoing litigation?

Yes. I mean, as we mentioned, I can't go too deep into this, but what I can tell you is from a -- at least as it relates -- let's put Insmed to the side because they're earlier stage, right? So they're kind of down the road. But if you think about Liquidia, so we're involved in the patent litigation. We have a trial date in District Court scheduled for March of next year. And then our 30-month day expires in October of next year, right? So I think that kind of bounds sort of the time line there. And then we'll see what happens in the court case in terms of outcomes or just kind of thinking about potential outcomes. I think simply put, for us to win, we need to show only the Liquidia infringed 1 valid claim of 1 patent, and there's 3 patents that issue in the District Court case with multiple claims. So we just have to win on 1. For them to win, they have to win every single patent claim, every -- for them to win, every single patent claim against Liquidia must be either invalid or infringed. So -- that's sort of how we kind of think about things. Now once we get to or if we get to a point where we have competition, I would sort of remind investors that it's a big market out there in Group 1, right? So I think a lot of people look at this as a little bit of a zero-sum game, and we don't really think that's the case. So Group 1 has got, call it, 45,000 to 50,000 patients with many therapies, and we've been able to build a substantial business there, obviously. There's only 4,000 of those patients that are on Tyvaso. And even if you kind of broaden that out to treprostinil, you're only looking at about 25% of patients that are on treprostinil. So you still have like tens of thousands of patients that are out there for us and other competitors. So we still think that there's a lot of opportunity for us and others that come to the market to serve patients and grow our pace of it.

And with Delta taking into account the expansion opportunities outside of Group 1?

Exactly right. And then we get a -- you get it into Group 3 and there, we have some exclusivity with PH-ILD. We have -- we think we have orphan drug designation with IPF. And so there, we actually will have some runway to ourselves.

Got it. No, perfect. That makes sense. So I think that kind of covers the most often and asked questions on the ILD launch. So perhaps we can pivot to another few different topics because you guys do have additional programs going on and some other dynamics that we get asked about the Remodulin generic launch, again, you guys alluded to in the latest earnings call that the uptake in the subcu has kind of been similar to the IV. Can you just kind of refresh us on what's the percentage of patients you've estimated that have gone to generic? What's the profile of those patients? And how is that tracking going forward from the early days that you're seeing?

Yes. So if I go back to 2019, I think at the first month of launch -- in the first month of the generic launch, we saw what we kind of termed a bolus of patients, which are some dozens of patients, that transitioned over. And again, these were predominantly the dual-eligible Medicare, Medicaid patients that were for a switch. I mean, yes, some onesies and twosies with some other payers, but it was vast, vast majority were these dual-eligible patients. And then that tapered off over about 3 to 4 months to single-digit numbers, and even in some months 0 transitions. And so we saw really the same thing play out earlier this year with the launch of subcu, right? So you saw kind of this initial again, bolus of dozens of patients. I mean, you're talking like low single-digit percentage of overall patients transition over and then that's kind of just tapered off to a trickle. It was the same category of patients to dual-eligible Medicare, Medicaid patients. So that's one aspect to it, right? Now -- and the other question is, well, okay, so those are the transitions. How has the launch of generics impacted your de novo starts? And there, I think this is where I think we've been really resilient. If you look over the last, call it, 3, 4 years and just look at sort of average new patient starts per month or per quarter or however you want to look at it. I mean, we're really, we see no change there. And in fact, in some months, some quarters, we've actually seen some uptick. So that tells us that we're competing and doing really well. It's because we don't have visibility to their new patient starts. All we can do is look ours and look at that relative to historical trends.

But that was theoretically the population most at risk for new starts, right? So you're not seeing necessarily a huge impact there that kind of bodes well for the overall perspective of the franchise, right?

Yes, we certainly think so. And then you may -- your talking about bringing Remunity to the table, which we launched earlier this year, which is a proprietary pump for Remodulin. And then as I said, we've got RemoPro in development, which we think will be, like I said earlier, just a game changer for these patients.

So how has been the Remunity launch so far? Is this mostly a new start kind of product? Do you have patients switching? And how meaningful is it? That there's some pushback, say, hey, it's just a different kind of pump system, but what are some of the benefits that patients might be getting on starting on Remunity versus the legacy pumps?

Yes. So I think in terms of new patients versus transitions, it's a little bit of both right now, which is what we expected. I think the receptivity to it has been very positive. I think patients are excited about the smaller [ clinical ] profile. It's the first pump that was actually designed specifically for PAH patients. The technology is 21st century. There's a lot of additional safety features associated with that. So I think the reception of Remunity has been -- and the reaction to it has been very positive. As we said at the very beginning, and this is -- again, this is the same argument we made as to why we thought there wouldn't be this just pendulum shift of Remodulin patients going to generic, these are very fragile patients. And so we're really trying to bring the patients, bring the physicians along methodically and carefully because we don't want to -- we want the patients to feel good about it. We want the patient -- and with the physicians to feel good about it. And so we're just continuing a very methodical approach of starting new patients, transitioning new patients. I mean the other thing I would say about this, I think I've said before is -- this is maybe one of the more complicated launches, maybe the most complicated launch we've done just because you have the aspect of having the pharmacists, specialty pharmacy pharmacist fill the cassettes and send these out to the patients. So introduces another logistical complexity that we have to manage through.

Got it. Understood. And perhaps just to talk about the broader pipeline. So again, I think you guys have outlined that both COPD and IPF programs could actually make a contribution towards that 25,000 goal by 2025. Is there any way to get a little bit more granular on when we could potentially see data? How meaningful if you got contribution do you expect to get from either of those opportunities towards that 25,000 goal? How should we think about that?

Yes. I mean, I would say that the studies are enrolling. I mean, given you just look at the time line, I mean, you would expect that it's going to be on the back half of the '25 -- kind of the end of this time period. And I think beyond that, we haven't really given any specifics other than just say we're continuing to enroll all of these studies, and that process is going well.

Got it. What about ralinepag? What's the latest there? Time lines or enrollment progress? How are you guys feeling about that program? And where does it actually fit with the overall...

I would say, it's in the same category with PERFECT and TETON, right? So that it's kind of in the middle of Phase III enrolling, and I think we would expect some contribution from that towards the back half of the 25x25 period.

Got it. And is that going to be mostly seeing our position as a follow-up to Orenitram? How should we think about the competition within the oral agents in the advanced oral prostacyclin therapy class?

Yes, I think it's obviously dependent on the data and how the trial goes. I think it's potentially going to be viewed as a pre-Orenitram. And again, it's going to depend on the patient ID too, right? But if you're sort of thinking about your typical patient journey, I think all other things being equal, you probably start on ralinepag before you go -- you go to Orenitram. And from our standpoint, we're agnostic. I think we just want to make -- we want to have a therapy at all stops along with a journey to help them manage this disease.

Got it. And beyond RemoPro and it sounds like that's still a little earlier stage, anything else in the pipeline that you guys are excited about or the could ends our clinic in the next 1 year, 1.5 years, perhaps?

I think the other thing that we talk about from time to time is our SAPPHIRE study, which is our gene therapy study to treat PAH. That's really, I think, our first -- our nearest term cellular therapy that we're excited about, and that continues to make progress towards wrapping up. So that's the other one I would sort of throw in that category as well.

Got it. Perfect. And just perhaps a couple of last questions here. So capital allocation priority that has historically been a point of discussion. I mean given the potential to generate as much cash flow as you can with the ILD launch, how is that looking out currently in terms of investment in R&D, business development, share repurchases? What's kind of the packing order of your alternatives and capital allocation?

You nailed it. It's R&D, it's business development, it's share repurchases, in that order.

Got it. And...

Doesn't really changed over the last few years.

Got it. Fair enough. Perhaps just a last one for me. So you guys also announced recently that the public benefit conversion. Just curious about what's -- what are some of the benefits that come with that? And what kind of drove you is to make that decision?

Sure. So from our standpoint, it was really -- it was an opportunity, I think, to, I guess, formally reflect the way that we've always sort of approached our business, right, which is I think we've got certainly -- we've got a very patient-centric mindset. We've got an employee-centric mindset, we certainly have a shareholder-centric mindset. And so this, for us, is really an opportunity to sort of combine those things together, allow us to highlight our commitment to our patients, which we think is going to resonate with our customers and allow us to continue to compete for the best talent so that we can continue to make these great advances in our pipeline and new therapies. And then I think that also, at least in the conversations we had with most of our investors through this process resonated very well with them. I think they were sort of engaged and excited to have an opportunity to invest in a company that really kind of is able to kind of straddle all 3 of those things.

Got it. Got it. Any last words? Anything else that investors might be missing on this story right now? Anything else that we haven't discussed that might be worth highlighting?

No. I think -- I mean, I think we covered it, like I said at the beginning, I think the kind of takeaway for us is that we're really focused on long term, getting to 25,000 patients by the end of 2025. And in the near term, it's get to 6,000 patients on Tyvaso by the end of next year.

Awesome. Now congrats on all the progress you've made so far, and I appreciate you guys participating on the healthcare conference.

Yes. Thank you, Tiago.

All right. Thanks a lot.