United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Perfect. Welcome, everyone, to Annual Healthcare Conference at Credit Suisse. I'm Tiago Fauth. I'm one of the lead analyst in the biotech franchise here. We're joined today by United Therapeutics. So Pat and Dewey. So thank you very much for joining us.

Thank you.

Thank you for having us. Can I mention really quick that Pat and I may make forward-looking statements in our presentation today. And we caution you to review the risks and uncertainties associated with these disclosures in our SEC filings, particularly Forms 10-K and 10-Q that are available on the SEC website. Thank you.

There you go. Box checked. We can start just with a brief overview. So again, you came off of one of the strongest quarters for the [indiscernible] franchise overall. You're kind of setting up really well and delivering into some aspirations and some guidance. So how is you to right now set up in the next quarter and the next year, in the next 5 years? So if you can start bigger picture and then I'll drill in, in a couple of key drivers going forward.

Sure, sure. So of course, we had the ILD approval last year. And then this year, in May, Tyvaso DPI was approved, and then we add these... [Technical Difficulty] And what its capabilities are. So that's ongoing. We, of course, have a stronger presence in the PAH can be just by default by being on the market for now 13 years. But we're going to continue to build the ILD presence and continue to meet with physicians. And we're already seeing, again, traction there. There is interest, but certainly, it's a disease where it's going to take out for us to continue to grow.

Got it. But again, so far, hard.

So far, so good.

No, that makes sense. And when we're thinking about the label expansion for the therapy for IPF specifically. Again, there's a lot of excitement with the physicians that we generally speak to, several shortcomings with standard of care. This could potentially be a new either combo approach or just a new therapy for IPF patients. The increased subset of patients that IPF actually showed some pretty compelling data. But it doesn't seem like a lot of folks are taking that necessarily into account on their models. So what are some of the puts and takes? Because I'm assuming you get questions on this, is it more about just time to data for folks to appreciate how transformative this opportunity could be? What are some of the dynamics in your recent investor interactions, for example?

Well, I mean, we were excited about what we saw with the increase, and there was good reason to be excited. So we started TETON 1 a little over a year ago. We've enrolled our first patient in TETON 2, what, 6 weeks ago?

Yes. 6 Weeks ago.

So those are off and running. And I think the data in the end will speak for itself. Now the addressable population for IPF, we estimate it to be around 100,000. So a significant amount of people when compared to both PAH and ILD. So great opportunity there. I think we have every reason to be confident.

Got it. And when thinking about enrollment pace or roaming dynamics for TETON 1 versus into, again, U.S. So that's like, what are some of the potential dynamics that may come into play? Can you enroll ex-U.S. a little faster? What are some of those dynamics?

Well, we have a very talented clinical team. And they're making every effort to accelerate enrollment. There's always challenges ex-U.S. And it's not necessarily linear. So it's when -- as far as where we're enrolled now versus when it's complete, we're not going to comment on where we sit now. And when we do reach full enrollment, we'll release that information.

Got it. But just to confirm, when I'm thinking about the goal of 25x25, that will not necessarily account with a minimal contribution from IPF? What's fair to assume in that aspiration?

It could be a contributor, but it will be really on the front end of that opportunity.

Got it. Okay. That makes a lot of sense. Going back to our Remodulin, I guess. And again, just want to recap prior to generics launching, what was the mix between IV subcu? Because, again, that kind of plays into the pump availability from our channel check, it was about 50-50 or 55-45. Has that evolved at all? Now you actually have a better device for subcutaneous delivery. Has that changed the new patient starts and Remodulin that make subcu IV? Or is it something that is a little too early to gauge?

It remains about 50-50. It might move around a little bit over time, but it all centers around the 50-50 mix.

And again, it's kind of an interesting story because for a lot of investors, it was more a question of when Remodulin was going to drop to 0 or not if it was going to drop this year, right? And even in recent earnings from a competitor, you see that revenues are still kind of lagging in terms of flexion -- you haven't seen an inflection in the growth rate of those revenues. When we talk to physicians, again, there's a very small subset of patients that are being forced into generic drugs. Like is that consistent with your expectations? Is this something that can actually fall off a cliff out of nowhere? Definitely doesn't sound like that's the case, but is there anything that investors are missing because they were marginal franchise as certainly being a lot more resilient than a lot of folks were expecting early on?

Yes, sure. So when you look at the Remodulin business, although it's approved as a drug, really key to that product is delivery. And so you have to have a pump to deliver at either subcu or IV. And although it's not a combination product, it acts like one in that you have to have a pump. And note that pump has to be approved to administer Remodulin. Now we know in 2015, the primary pump supplier to the Remodulin market took their pump off the market. And we bought a supply of those pumps to carry us for years. And the inventory of those pumps has diminished. And now we're relying on refurbishment of existing pumps and those get reissued. Now in parallel, while that was happening, we were developing our own subcu pump with -- in a partnership with DEKA Corporation in New Hampshire. And that, of course, has been launched as Remunity. And that's now available in 2 versions: a pharma build version, which has been on the market for about a year now; and in September, we launched a patient filled version. Now that's exclusive to our Remodulin. So any entrant into the generic market has to have a way to deliver the product to the patient. They can't just show up with the drug. So it will be a challenge with subcu pumps simply because availability of subcu pumps is limited.

Got it. So again, there's always some quarter-over-quarter choppiness. But so far, no real trends of underlying negative organic growth for the Remodulin franchise. Is that fair?

That's fair.

Got it. Okay. And again, when you're thinking about the profile of patients that are being converted to generic, in-ward experience, again, dual eligibility, Medicare Medicaid patients based on the channel checks. Is that roughly consistent so far with what you've heard? Or how much visibility do you actually have on that because it might be unfair to even ask you so?

So I mean with Remodulin, I think the conversions really have been in the IV area because availability of IV pumps is greater than subcu. I mean we don't have a tremendous amount of visibility into it, but we can see it. We can see it happening.

Got it. Okay. [indiscernible] spend a few minutes also discussing the oral prostacyclin franchise. And again, that's Orenitram and ralinepag. So first on Orenitram, seems to be a fairly, fairly stable franchise. Sometimes it feels like there might be some additional growth drivers, physician feedback indicates some concerns about titration. And you've generally -- you recently produced some new data that actually could bridge some of that gap and actually get patients into much higher dose levels. So can you talk about some of the puts and takes on Orenitram being potentially a growth franchise versus just a stable franchise? Selexipag still seems to be doing okay in the market. So it's not like there is a lot of cannibalization necessarily. But how should we think about Orenitram going forward?

Yes. I think our recent focus has been on making the titration process with Orenitram easier. So we published the expedite data recently. And we're also working on some packaging that will make the titration -- managing the titration process easier. So we believe those will have some impact. We're fully vested in continuing to grow Orenitram, and we believe it's a great product.

Got it. And how does ralinepag potentially fits within that space? That -- there is this assumption that there might be some potential competition giving [indiscernible] with the oral third line-ish kind of patients. It's kind of hard as not that black and white, right? But how would the ralinepag impact potentially fit into that? And again, there are some questions about you're running an outcome study, you're also running an exercise capacity study. Some folks would have expected the exercise capacity is potentially read out a little sooner or -- yes, how is that clinical development for ralinepag been going through in the last couple of years perhaps?

Well, so the studies are ongoing and enrollments going along as we expect. We're excited about ralinepag. It has some advantages to it and that it's a once-a-day tablet, and it has a long half-life. So we're excited to get that to market. As far as when readouts will happen, again, tough to predict exactly when that will happen. But we do think it's going to have a big impact on the market, and it will be complementary to our other products.

Got it. Okay. And we kind of did run through basically all of the treprostinil franchise. Unituxin, not necessarily something that comes up super often. But again, you do see some seasonality and some quarters of strength. Like how should investors think about that as -- at on a run rate basis? Because it feels like you have pretty steady demand, but not necessarily a major growth driver for that particular product.

Yes, we expect Unituxin to continue to be steady. As you look at the quarterly revenue from Unituxin, it's impacted by ordering patterns from our partners, mainly in Japan, in Canada. Of course, Japan recently received approval for Unituxin. So there was inventory stocking with that. But we believe it's going to be a steady product. And certainly, it's been very successful from the standpoint of what we originally predicted it would be.

Got it. Perfect. Moving in little earlier, perhaps on the pipeline, just [ Martine ] has always talked about some of the new technologies in the more, call it, speculative or earlier stage science that you have with Xeno transplantation or even [indiscernible] print in organs. Xeno transportation, again, you have a couple of fairly recent case studies. What's the status on XenoKidney or Xenoheart? Is this something that might be getting into a clinical trial in a more structured manner in the near term? How should investors think about that?

Well, I think -- let's talk about xenoheart first. So we've talked about our capital investment in a clinical facility to support the pigs that we need to execute a xenoheart study. We're in the process of building that now, and that facility will be available for use in early Q1 of 2024. Meanwhile, we continue to work with FDA to really get into the specifics of the preclinical requirements and that work will really begin in earnest in early '23. So there'll be some activity there now. There's also the work being done by our partner research institutions with transplant into brain dead human donors which has been in the press. Certainly, compassionate use opportunities will come up, and we'll evaluate those on a case-by-case basis. So there's a lot of activity. I think, really, you'll see a lot of momentum start probably in about 12 to 18 months on xenoheart. Xenokidney is kind of in the same boat, again, defining the preclinical work that's needed, and we're working with UAB on that. So really probably right around mid-decade is when things are really going to start happening. And I think, again, we're very excited about it. A lot of progress has been made. Certainly, the Bennett transplant earlier this year, got a lot of press and a lot of notice and gave us a lot of valuable information. And of course, we owe the Bennett family a dead gratitude for that.

Got it. And again, there really aren't comps in the space, right? So I know there are very few for clinical precedents. So a lot of things I'm assuming you're figuring out in real time with the agency.

That's correct.

But thinking about just the lead time for a potential commercial margin specifically with the manufacturing facility because it is quite unique and involves several different divisions of the FDA. Like what would that look like from a time line perspective, maybe from a CapEx perspective?

Well, certainly, the initial CapEx has started in -- within the clinical facility. Now the commercial size facility is going to be a large investment and it's going to be a complicated facility. I think we've really talked about end of decade where this really is all going to start to happen. So really, we're planning for that in the future. These are going to be big expenditures. And ultimately, I think as we've looked at, it will end up with a number of regionally based facilities that will support the main transplant centers in those areas.

Understood. I want to be mindful if there are any questions from the audience, feel free to raise your hand and there's a microphone. But if not -- and I do have a follow-up. So to your point, it could be a significant capital commitment at the same time. Right now, we have $3 billion of cash available, right? So -- which is a pretty unique position. So I'll ask the typical capital deployment, capital allocation strategy. Again, you have several programs in clinic already. Is licensing of early-stage assets or near revenue assets, something that might fit within the user strategy in the near term?

Yes. I mean our priority remains investing in R&D and investing in the CapEx needed to support that R&D, and that's followed by business development opportunities and then returning shareholder value. And that's really hasn't changed.

No, it's been pretty consistent.

Yes.

I always ask to but great. I don't know if there are any other questions. Okay. Anything else that investors are currently missing on the user story. It seems, again, there's a lot more interest. The commercial performance has been really strong. So what are you guys excited about for 2023?

2023 is really an execution year for us, where -- we've got the approval of Tyvaso DPI. We've got in the market. We'll have CMS reimbursements in for the full year. And so it's really just executing on what we've been building for the past half decade. And growing the business that way on the top line and the bottom line, of course. In terms of beyond 2023, I guess, we start getting ready for clinical data, whether it's in '24 or '25. But that's when things get exciting that if it's not a small molecule clinical data that we've got. Its potential for movement with the xeno transplantation programs or even the 3D printed organ programs or regenerative medicine where we're working with lungs as well.

Got it. Perfect. I think with that, we can probably wrap it up. But Again, I appreciate you guys attending the conference and taking the time to talk to us today.

Thank you.