United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Thank you, Ben. Really appreciate it. Always really good work to make it so easy for us. Hey, everybody. We have today for our first day of the Oppenheimer Healthcare Conference, one of the companies I have been following for a long time called United Therapeutics. Their Chief Financial Officer, James; and Patrick, Head of Technical Ops, if I'm not mistaken. Sorry, if I give you a promotion, Patrick, or maybe not. But we have both of them joining us today for a conversation. So both of you, welcome. And James, maybe you could start off with about a 3- to 5-minute state-of-the-business intro. But really appreciate having both of you here.

Yes. Good morning, Hartaj. Really first, I want to thank you for inviting us to the fireside chat this morning and Oppenheimer for the opportunity to join the conference now, as I mentioned, but also throughout the day. And before I jump into it, Hartaj, let me do a quick opening remarks to the legalese. And our remarks will include forward-looking statements. So please see our latest SEC filings, including Forms 10-K and 10-Q, for the risks and uncertainties associated with these statements. And as you mentioned, Hartaj, I'm glad to have Pat Poisson who's our EVP of Technical Operations this morning, join us. And he'll be available to take any questions as well. To your opening of giving a brief overview of the business, I love to do it. There's a lot of exciting things at United Therapeutics to talk about. And I'll frame it maybe in 3 kind of segments. I'll quickly do a 2021 overview, then I'll really focus on 2022. And then I want to reach forward to talk about our goals out to 2025, which we've talked about before. But let me start with 2021. We were really pleased, Hartaj, to report a few weeks ago, double-digit revenue growth and double-digit patient growth as a percentage basis for the year-end 2021. And during 2021, we launched one new indication, which was Tyvaso for the use in patients with pulmonary hypertension associated with interstitial lung disease. And we also launched the Remunity subcutaneous pump for the use with branded Remodulin. So across UT, it was an incredibly exciting year for UT and all the Unitherians, and we accomplished a lot. But we did it proudly for the patients that we serve and support every day. And that commitment to our patients and that excitement, Hartaj, continues into 2022. And I'll give you 3 quick maybe points as we focus on 2022. The first being that we want to continue to execute our commercial plan to grow the number of patients on Tyvaso to 6,000 by the end of this year. And we've talked about that quite a bit since the launch of PH -- Tyvaso for the use in PH-ILD. The second thing we're working on is securing approval for Tyvaso DPI with a May FDA decision date. And third, Hartaj, we want to continue enrolling in our 7 registration phase studies. We have 7 studies that we are continuing to enroll going forward. And let me touch on those briefly. They may come up in some of the Q&A and chat following. But real quick, we have a study called TETON, and -- which is a domestic-based study and one called TETON 2, which is an international study. And that's really to study Tyvaso in patients with idiopathic pulmonary fibrosis. And that study was really based upon the really strong clinical results of the INCREASE clinical trial and the benefit on forced vital capacity. So we designed those 2 trials. The third study is the PERFECT clinical trial, which is the use of Tyvaso in patients with pulmonary hypertension associated with COPD. We also have 2 studies, which are called the Advanced Outcomes, Advanced Capacity clinical studies, that is studying ralinepag. Outcomes is a clinical worsening study and Capacity is an exercise study. And those studies are using an IP receptor agonist. The sixth study that we're working on is called EVLP or involved in EVLP and organ manufacturing. And that's really to make more lungs available for transplant to really eliminate and minimize this real shortage of transplantable organs. And the seventh study, Hartaj, is a gene therapy study that is really to rebuild the blood vessels of the lungs that have been compromised by pulmonary arterial hypertension. So in 2022, it's an incredibly busy year -- or will be an incredibly busy year. And we're going to focus again on commercial plans, approval of Tyvaso DPI in these 7 Phase III clinical studies. If I could take one more moment -- and let me reach forward into -- and out to 2025. And we've talked about our longer-term goal of having 25,000 patients on our therapies in 2025. And what we're going to do is we're really going to build on our commercial platform of Tyvaso, Orenitram and Remodulin, which I know we'll talk about soon. But we'll also weave in what we hope to achieve successful clinical outcomes in those 7 Phase III trials to ultimately get to 2025 with 25,000 patients on our therapies. So there's a quick overview of kind of where we're focused in the near term, but where we're also focused in the long term.

Yes. No, this is great, James. I mean you've got a lot going on and the pace of what United Therapeutics is going on is just picking up. And you're actually probably the company that we get the most hit up on by our clients of the larger companies that we follow. So it makes complete sense. Probably the single biggest question we get right now, and it's a near-term focus question, James, is just DPI getting pushed back from February to about May took some folks by surprise. You had always said, and even in October of last year, that it could take up to the summer to get it approved. It seems like that's where it's going to go. It may -- assuming we get approval then. Can you just talk about -- pushing it back, does that add any risk to the approval? You're providing more data to the FDA with follow-up from the B study, et cetera. Is there any extra risk that you think there is to the PDUFA? Or this is a fairly kind of normal series of steps that the FDA is going through?

Yes. Thanks for the question, Hartaj. It is a question we continue to get as well. And let me frame it a little bit from our perspective and then give you some additional information. But to frame it as part of the FDA's review process, the agency did request additional information about the pulmonary safety of Tyvaso DPI, specifically related to the citizens' petition. So we promptly responded to the agency's request. And the agency did deem that additional information in our response to be what is called a major amendment. And so it pushed our action date out till May. We don't believe that there are any pulmonary safety issues with Tyvaso DPI and believe that our response to the FDA should support approval. And therefore, we remain on track to launch Tyvaso DPI by this summer, as you've referenced and as we've guided to previously. So we're still on track for that. As to the additional risks and maybe some of the additional conversations that are ongoing, we don't really get into those, as you know, following really our long-standing practice of not getting into the details regarding back-and-forth interactions. So I'm really going to stick to that at this point. And I want to really touch on one other aspect. And this was regarding the issue around the complete response letter that was really -- in 2021, related to a compliance issue at one of our contract laboratories related to some analytical testing procedures. And as we discussed, the FDA has not asked any further questions related to that issue, as a part of their extension of the PDUFA date. So we believe that issue is resolved. And we, in fact, moved the test out of that affected facility. But at this point, we have not received any additional information request for that. So I wanted to frame the response a little bit in those 2 ways because when we think about Tyvaso DPI, those are the 2 questions we've been getting.

Yes, which makes sense, James. And then just another just a question on DPI before we kind of talk about some of the other things is just Mike Benkowitz talked about how he and his team are ready to go on the fourth quarter earnings call, assuming approval in May. Can you just talk to a little bit about what are some of the more specific commercial activities or pre-commercial activities that UTHR is doing, assuming a DPI approval in May of this year. And then how do you see the uptake, both in PH and PH-ILD with DPI -- or potential uptake?

Yes. Thanks, Hartaj. I'm going to -- I'll take maybe a little bit of the first part of your question -- or questions, and then I'll bring Pat Poisson into -- he is, again, the EVP of Technical Operations, to talk a little bit about the manufacturing preparation. But the first part of your question with respect to Tyvaso DPI and really the launch, we're prepared to launch DPI immediately after approval. And what we plan to do is use our existing sales force and field force to support this launch, which additional Unitherians have been in share heading into the launch of Tyvaso, again, for the approval of PH-ILD last year. So again, that field force is in share and they're ready to go. And so once again, assuming approval, we'll be ready to go right away. From the standpoint of call points, we'll be calling on the pulmonary arterial hypertension physicians as well as the PH-ILD physicians that we have gotten to know and as we continue to add, as we talk about the nebulized version of Tyvaso for PH-ILD and those patients. So again, in summary, immediately, assuming approval happens, we'll be ready to launch. But Pat, can I turn it over to you to talk a little bit about the manufacturing prep for Tyvaso DPI?

Yes. Sure, James. So MannKind is working full time as we speak to prepare launch quantities. And it is our plan to be ready to supply product to the market as soon as we get approval. In addition to that, Hartaj, we're investing in added capacity in both the MannKind facility in Connecticut and as well as our own facility here in North Carolina to add manufacturing and packaging capacity in anticipation of a potential positive outcome in some of our new clinical studies as well as extending outside of the U.S. with DPI. So over the last few years, through the start of the clinical programs, we have built a really strong relationship with MannKind. And we're excited about the future of this product, and we're really looking forward to bringing this new convenient therapy to our patients.

And to that point, Pat, I think that United Therapeutics has touched upon this sometimes before again with Mike, and if you and James have any comment, that in PAH or PH-ILD, up to 2/3 and maybe even more of the patients could prefer the DPI over the nebulizer. Has your market research -- you still believe that that's the way it could go going forward? Do you think it could be greater than that, less than that? How do you see it sort of playing out between the nebulizer and the DPI?

Yes. Pat, do you want me to take it?

I can comment on it, and if you want to add to it.

Go ahead.

So Hartaj, as we look at what we call classic Tyvaso versus Tyvaso DPI. DPI is certainly more convenient for the patient in a variety of areas, and we think there's going to be very strong interest there, not only for naive patients coming in to see that option available, but for patients that are on current Tyvaso therapy, where they don't have to carry around a nebulizer. And the inhalation is quite a bit shorter. So they're going to gain a lot of time back in their day. And we know from the BREEZE extension that patients really like being on DPI. So this is part of why we're so excited to get this out there. And I think a lot of people are going to see the benefits of it. So James, do you want to add to that?

Yes. Just a couple of points, Hartaj. So just as a reminder for our listeners that the NDA request for Tyvaso DPI currently is for both PAH and PH-ILD. And for PAH, as Pat just mentioned, there's an incredible amount of excitement around the DPI. So as kind of an organization of what Michael and his commercial teams are doing, we're planning to present DPI as an option earlier in the course of therapy and potentially even as a first prostacyclin option for appropriate patients. Longer term, again, as we all learn and as Pat talked about, we think the convenience of the DPI inhaler will lead to Tyvaso being around, as you talked about, Hartaj, 60% to 70% of Tyvaso use in PAH. With respect to PH-ILD, we're still evaluating and learning the dynamics. And there may be some patients who want to stay on the nebulized version of current Tyvaso, familiarity of -- for the device, cost reasons, et cetera, but we plan to continue supporting both patient preferences for Tyvaso in PAH and PH-ILD. So that should give you a little bit of maybe background in terms of how we're thinking about it, but also how we're learning about it in the PH-ILD space.

And then, James, just on that, assuming that your PH IPF and PH COPD studies are positive, they're on the -- currently, I believe, being run on the nebulizer, right? So you just -- would you have to do another bridging study? Or that would just be a simple sNDA to get the DPI approved for those two, assuming you get approval right now for May?

Yes. And just maybe to reframe -- just to maybe reiterate the first part of your statement. So the PERFECT study and the TETON studies that I talked about earlier, we're evaluating the use of nebulized Tyvaso. And so the plan going forward, if those are positive, is to work with the FDA to evaluate really what would be a path forward to use and get approval for Tyvaso DPI in those PH pulmonary hypertension with COPD as well as the IPF study. So right now, I think our focus is really on to get through the clinical studies, get approval and then being mindful of what we learn in this process with DPI to figure out a way and a path forward in the future.

Yes. Great. [Operator Instructions] We'll just go on to other areas UTHR has going on other than, I want to say just, DPI, excuse my air quotes.

Air quotes are going on Hartaj, I know.

Yes, I know. I know. So -- and we'll leave about 5 or 10 minutes for Q&A right at the end, James. We're getting close to there. Maybe we can just focus on the organ transplantation program. I mean you're starting to get more useful there, more interest -- we're actually getting more questions from investors. My first question would be, James and Patrick, can you just talk to us a little bit about how do you see organ transplantation? I mean is it something that could be meaningful clinical trials by the middle part of this decade? Or do you see it more as a second half decade with meaningful clinical trials with potential for meaningful commercialization by the end of this decade? Just help us frame that thinking with organ transplantation.

Yes. Pat, why don't I start? And then if you want to maybe add in some because some of the activity does fall within your areas of responsibility. But Hartaj, let me frame it because we are getting a lot of questions as well, right? If you think about organ manufacturing for us, it falls into 3 buckets, right, broadly speaking, which is EVLP, which we have a clinical trial going on. And we talked about xeno transplantation, on which I'll spend a minute on. But we also have 3D printing of organs in the organ manufacturing group as well as regenerative medicine, right, or lung lobes, where we're decellularizing and then recellularizing porcine scaffolds. But the latest maybe and the most kind of prominent in the news has been around the xeno transplantation and really 3 procedures that have taken place. There's the U [ thymo ] kidney at New York University Langone Health. And then you have the U heart and the U kidney human preclinical model transplants at the University of Maryland School of Medicine and the University of Alabama at Birmingham School of Medicine. And these have -- and thinking about Mr. Bennett, these have garnered and gained a lot of attention on the possibility of being able to support and provide an unlimited amount of transplantable organs to patients that are in need. And we're saddened certainly by the death of Mr. Bennett, who after 2 months of receiving a U heart transplant under an FDA approved compassionate use procedure, passed away. And we are grateful for him and his family who showed tremendous courage and selflessness to really advance and provide a lot of information and significant learnings and data to help support future work in that space. Now specifically on your question of the clinical trials going forward and timelines, we're still working with the FDA for a clinical path forward for xeno transplantation. So we're not sure exactly yet what the timelines would be. So we'll stay tuned for that. Broadly in terms of timing, and I think Martine has talked about this on previous calls, it's more of the second half of the 2020s because there is still a lot to prove out the science, prepare for a clinical trial, right? Build a clinical scale DPF, prove out the science and then build a commercial DPF, which, again, there's a lot of things wrapped up in that. So there's still a fair amount of work to do. But we are certainly encouraged by the support of our education collaborators to advance what we see as an opportunity. So I'll pause there. And Pat, would you want to add anything to that based upon Hartaj's question?

Sure. I think the only thing I would add, James and Hartaj, is that we've started to think about the infrastructure needed to support these clinical programs. These are very specialized facilities. And we'll be working closely with FDA to build that capability at UT to support a clinical trial for xeno.

No, that's good to know Pat. And I just want to remind viewers, listeners that we actually did a call with Pat and other folks last year on what was called RTP Manufacturing Day, which led to some really great conversations. We're still hoping to do that this year in October, hopefully, in-person. And Pat will be able to interact with you also. Just in terms of just the capital investments for organ transplantation, James, Martine mentioned that also in the last call that the company is kind of walking through this. How to think about that? And then would that affect your budgeting algorithm going forward? I know you're seeing more revenues and potentially greater revenues going forward. Just how to think of those 2 dynamics?

Sure. So the capital around what Pat talked to a clinical DPF and, longer term, a commercial DPF, so from the capital perspective, the clinical scale DPF, which Pat talked about that we're looking at in Virginia, the size of that capital investment is not necessarily significant. It is significant and important to evaluate whether we do the investment. But from -- and relative to a commercial DPF, it is less. A commercial DPF is going to run anywhere from $500 million to $1 billion. And then it will be a determination of how many ultimately do you need. So we do think from a revenue perspective and revenue generation perspective, we'll have the capital internally to construct those facilities. As you think about the budget algorithm, Hartaj, we still apply what we think is a financially responsible budget algorithm, where we spend no more on cash operating budgets in any given year that is no greater than 50% of prior year revenues. So prior year revenues times 50% is how we actually budget and allocate internally our cash operating budgets annually. A commercial DPF, obviously, at the scale that we talked about will be outside of that budget algorithm because that would be a heavy capital-intensive outlay. And maybe a third point around your budget algorithm is we, again, are applying that in 2022 and expect to apply that going forward. Again, it's no more than 50% of prior year revenue. And why that's important maybe just from an investor's perspective is that adds leverage into the business as you have, and we expect to have increasing revenue from here out to 2025 that actually holding your expenses fixed based on prior year revenue gives you a little bit of operating leverage in the model. And so it's a discipline that's known throughout UT. And all the Unitherians know it from a cash budgeting perspective.

No, that's great to know, James. It's interesting because I think some of our clients who are long-term owners of stocks, the larger [ long onlies ] get really interested with the organ transplantation business on top of everything else that you've got going on over the next 5 to 7 years. So really, it'll be fascinating to see that play out. Maybe we can just go back to quickly on Orenitram and Remodulin. It seemed in the fourth quarter, there was a little nervousness, including us, James, on Remodulin. It was a little weaker than expected. We brought our Remodulin numbers down a little bit going forward. Not looking for any guidance, but can you just kind of walk us through how you see the Remodulin dynamics playing out both from a competitive perspective, whether with sort of what's going out there just in the commercial field?

Yes, sure. And let me -- maybe a good way to frame it, Hartaj, and I'll kind of outline it in maybe 3 ways. But the sales of Remodulin in the face of generic competition have held up pretty well. I think as we've talked about with you and others, patients, physicians, payers, they all recognize our outstanding commitment to PAH and a track record for service, support and supply chain reliability. So even in the face of generic competition for branded Remodulin, it has remained relatively robust. I think the second point is we have launched and really relaunched, in 2022, the Remunity subcutaneous pump. So it was initially launched in the prior year in '21. And just for some non-safety-related and really sensitive alarms on the pump, which we have subsequently addressed, we believe, we are planning to relaunch the Remunity pump in 2022 and are doing that right now. The receptivity of the Remunity pump, again, which would support branded Remodulin, has been very positive. Patients, even with these alarm nuances are -- elected to remain and stay on the Remunity pump. And so we think we've addressed those issues, and we think this will be something to support branded Remodulin and expect strong interest again in Remodulin with Remunity. I think a third thing that we're actually doing is there's a study that we're doing internally called the ARTISAN study. And what we're doing there is investigating really early and aggressive use of parenteral therapy, so Remodulin, to keep the pulmonary pressures low and lower upfront, which, as we have seen and others have read in the literature, has really longer-term benefit to PAH patients. So aggressively treating upfront, and this is the ARTISAN study, would then allow for Remodulin to be used and the life expectancy that's anticipated, again, that we expect to see in the study is out to 20-plus years. So when you think about the strength of Remodulin, the Remunity pump and some of the studies that we're doing internally, we do think there's a long-term opportunity for Remodulin. And one that I would tuck in as well is, and we've talked about this, is a prodrug. So we have a program that's looking at RemoPro, which would be a pain-free subcutaneous delivery of Remodulin through the skin. And this less painful subcu delivery of Remodulin would certainly support long-term growth of Remodulin as well. So it's an area of increased and continued interest for the patients that we serve.

Great. And James, just we got -- we're -- I want to call final jeopardy, a minute left. And so just we've got a couple of questions on the Internet, just if we can ask those real quickly. One is just going to Remodulin. What percent of your Remodulin patients do you expect to switch to the DEKA pump in the long term?

We think over the long term, Hartaj, that there will be a migration of a majority of the patients to the -- and you said Remunity pump, correct?

Remunity, right.

Yes. We will support patient preference. I think if you think about Tyvaso and what we talked about, we will support whatever the patient wants. But we do believe this new and up-to-date technology that you find in the Remunity pump will be -- want to be used by patients going forward.

Got it. And then last question on the Internet is any comments on the Liquidia loss? I had to ask.

You did, but Hartaj, it's an area that we will let the legal system kind of work out. And I don't really want to comment on anything at this point on any pending litigation.

Great. Well, we're at the time. James, thank you so very much. Pat, always a pleasure. It is great to see Pat now on the Wall Street treadmill as James and I were talking about. And we hope to see Pat more.

He's on the circuit. We're going to bring him on the circuit, Hartaj.

That's right. That's right. Orange fifth theory for Wall Street.

Thanks, Hartaj. Appreciate the invite again.

All right. Thank you.

James, always a pleasure. All right, Pat. Take care.

Bye.