United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Well, welcome, everyone. Thanks to come back with us for our Global Biopharma Conference with Leerink. I'm Roanna Ruiz, one of the senior biotech analysts here at Leerink. And it's my pleasure to introduce some of the management team from United Therapeutics. So with us, we have Pat Poisson, EVP of Technical Operations; and Dewey Steadman, Head of IR. So thanks for being with us.

Thanks.

Thanks.

Great. And before we dive into questions, I think Dewey has some forward-looking statements.

Yes. So remarks today that we may make may be forward looking in nature. So we encourage you to review our latest SEC filings, including Forms 10-K and 10-Q for the risks and uncertainties related to those potential statements. So thanks, Roanna.

Okay. Sounds good.

So to kick it off, we'll start with a bigger picture question. I know you've -- your company has focused a lot on pulmonary hypertension and built a deep portfolio. And for some investors that are a little bit newer to the story or just want to get a little bit of a refresh, can you talk a bit about the different commercial products that you have in pulmonary hypertension? And particularly the main focus for investors is Tyvaso, so if you could elaborate a little bit more about that.

Yes, sure, absolutely. So we have 4 products -- 4 key products in pulmonary hypertension: Remodulin, which is an injection form both for subcu and intravenous. We have orenitram, which is solid dose tablet. We have Tyvaso nebulization and Tyvaso DPI, both inhalation products. So those products are all approved to treat WHO Group 1 pulmonary arterial hypertension. And we're agnostic about which physicians choose to use with their patients. Really it's around giving them a choice for what's the best fit for the patient situation. Now with both of the Tyvaso versions, DPI and nebulization, those are also approved for WHO Group 3 PH-ILD, we kind of have the same view with those, which is to provide options. They're both great products, and they're both out there available to treat PH-ILD, and by the way, the only products approved to treat PH-ILD today where we took the risk with our INCREASE study to get those approved. So we're pleased to have those options out there, both very effective products. And most of our growth is coming from the PH-ILD space today.

Great. Sounds good. So thinking about 2024 and working on maximizing your revenues across the pulmonary hypertension portfolio, could you just talk a bit about execution on supply chain and manufacturing and what you're thinking about in terms of strategies to meet future demand?

Sure, sure. So I'm going to kind of break those up into some different areas. So first, I'll talk about our efforts on the commercial side. So we recently completed expansion of our PH-ILD sales force. And that will be in full effect for 2024. So we hope to see the outcomes of that really happening throughout this year. We started to see some traction in Q4 from our efforts in that area. On the supply chain side, really it's been about focusing on securing capacity at Mannkind to produce Tyvaso DPI. In Q2 last year, we implemented several changes and capacity expansions to meet immediate demand. Now long term, we've done a major capital expansion up at the Mannkind facility. We are now in the process of starting up that equipment. And by midyear, we expect to be able to supply at a rate of 25,000 patients a year with DPI. So that's been a multiyear undertaking. In the meantime, we've also moved primary kitting operations away from a third party to our facility in RTP, North Carolina. So that's compressed time lines for availability to ship to the distributors. So that's all had positive impacts on supply to the specialty distributors. And then, of course, on the development side, we're executing 3 major clinical studies, TETON 1, TETON 2 and the advanced outcome study with ralinepag. So there's a lot of activities happening both for near term, midterm and long-term growth.

Great. Sounds good. So you mentioned the recently expanded field force. I just wanted to dig in there a little bit more. So how are they penetrating into the market, educating physicians, especially around Tyvaso, Tyvaso DPI and leaning into PH-ILD?

Yes. So the doctors that treat PH-ILD are different than the doctors that treat PAH. So treprostinil is a new compound for these doctors, and it's really about educating them on how to diagnose PH-ILD patients. The gold standard is the right heart cath. And a lot of these doctors are unfamiliar with this procedure. So it's about connecting them with the resources to get it done as quick as possible so that a diagnosis can be made. In some cases, we refer those physicians to a PAH center where they can get assistance in doing the diagnosis. So a lot of it's been education. And by penetrating into these areas where we haven't been before and forming relationships with the health care community.

Got it. Great. And thinking about the Tyvaso franchise overall, you've had, over the past couple of calls, talked about the split between Tyvaso DPI and nebulizer. Can you talk a little bit about how physicians are viewing both products and what they might be drawn to in terms of one over the other?

Yes. Well, the nice thing for us is they're both great products. And so as you look at our revenue, and you can see from our Q4 report, the revenue split is about 60-40 right now. What we're seeing in terms of new starts is it's leaning more towards 70-30. And that's in favor of DPI. And the real driver there is the convenience play. It's a lot easier for the patient to administer. It's a single load cartridge and administer it, and you're done within seconds. Versus the nebulizer, which takes a little bit more effort to -- for the patient to administer. Now the benefits of the nebulizer is that it's more customizable to the patient. So there are some physicians that say, "Hey, we prefer to use this for titration and then transition to DPI." But the fact that we have both products available is a real advantage in this space because it gives the physician and the patient options. But I think long term, we're probably going to settle in probably at the 70-30 split. Nebulizer is going to always have a place due -- just due to its flexibility.

And so Pat's comment about effort isn't exertion on the part of the patient. It's the amount of time required to administer. It's actually the amount of lung capacity is actually less for the nebulizer than would be for DPI.

Yes. Understood. Great. So I wanted to focus in on your recent earnings report a little bit. We noticed that your recent earnings bucked a little bit of seasonality trends that people typically focus on for fourth quarter. So just thinking about that growth, partially driven by Tyvaso and how are you thinking about going into 2024? What do you expect in terms of the year ahead in terms of possible seasonality impacts and growth tailwinds?

Yes. I think our position is, is that we're always going to deal with seasonality, and there's a number of factors playing a role there. Probably the biggest one for us is we distribute our products primarily through 2 distributors only, 2 specialty distributors. So their ordering patterns really have an impact on our revenue. In fourth quarter, we were seeing great growth in the PH-ILD DPI space, which was great to see. But as far as how that continues, difficult to predict. But seasonality is always going to have an impact on our products, just due to the way they're administered. It's a chronic disease, you got the holidays and things like that to deal with. So I expect that will always churn in the background with these particular products.

Got it. Great. You kind of answered this a little bit, but thinking about demand for Tyvaso, especially in PH-ILD, what are you hearing anecdotally from the field in terms of physicians and patients looking for DPI in particular?

Well, the feedback from the field has been overwhelmingly positive. They loved the product. It has so many benefits for the patient. It makes them mobile, easy to administer, no cleaning. So a lot of benefits for them. And as our sales force now is at full staff, again, we see a lot of traction in 2024 and beyond in PH-ILD. And as doctors start to script the product, they tend to go from 1 to 2 patients up to 10 fairly rapidly. And it's about their -- getting their comfort level with working with treprostinil.

Got it. And earlier, you mentioned TETON 1 and TETON 2 studies in IPF. I was just curious, what do you think in terms of time lines and when we might get top line results? And what are you hoping to see in some of those results when they eventually come out?

Yes, that's a great question. So I think we recently stated that we -- at the end of the year, we were at about 70% enrollment. And it's a 52-week study. So I think right now, based on the rate of enrollment, we're looking at completing that around the end of the year, which will mean the readout will be about a year afterwards. So end of '25 is when you would see the readout. Now with IPF, what we're looking to see is a decrease in the -- or a slowing of the FVC. And what we saw in the INCREASE study, we saw exactly that, as a secondary endpoint. So we're optimistic that we're going to continue to see that. The competitive products out there that are approved for IPF aren't terribly effective, and they come with some pretty serious side effects. So right now, that space, it's only about 30% is being served by a drug product because of that. So we think there's a lot of great opportunity there. And if we can show some positive results, it's going to really benefit that patient population.

So the INCREASE study actually showed, in IPF PAH subgroup that was looked at as an exploratory endpoint, we saw an actual increase in FVC, and this compares to OFEV and Esbriet on the market now which actually decreased the amount of FVC decline in IPF patients. And so to see an improvement in IPF patients, that's a big deal for clinicians. And it's also interesting because PAH patients generally present with normal FVC. And so to see an increase in FVC in a patient population that has pulmonary hypertension really indicates that treprostinil is working on something other than pulmonary hypertension. And we do have papers and manuscripts showing in vitro antifibrotic properties of treprostinil.

Got it. Super helpful. So we started with TETON 1 and TETON 2 and IPF. I know you also have TETON PPF. And we sort of -- we've come across this comment from some of our doctors that just there could be possible read-through or like connections between the different populations. I was curious if you could elaborate on that a little bit and just touch on a little bit more of the market opportunities of IPF and PPS.

Yes. So we just started the TETON 3 study in, I think, third quarter, we enrolled our first patient in TETON 3,which is the PPF study. And we do believe that there is a relationship between PPF and IPF. And as Dewey mentioned, the antifibrotic properties of treprostinil, we think, will likely have the same role in that patient population. As far as the opportunities go, IPF, we estimate to have about 100,000 patients in the U.S. and PPF is at about 60,000 patients. So we think these are great opportunities considering our total patient population today, for instance, with ILD is 30,000. So Tyvaso DPI and Tyvaso nebulized could see really significant growth if we're able to achieve a positive clinical outcome in those studies.

Got it. And I wanted to take a minute also to ask about ralinepag, another pipeline opportunity that you have. So you have the ADVANCE OUTCOMES trial ongoing. And curious if you could talk a bit about the market opportunity for ralinepag and where you think it might fit into the treatment paradigm, assuming data works out well.

Yes. So the ADVANCE OUTCOMES study is an event-driven study. So right now, I think the most recent public statement we made, we passed 550 patients of enrollment. Based on how things are playing out, we expect to end up enrolling between 750 and upwards of 1,000 patients to achieve the clinical outcome. As far as when that will complete, it could be as early as mid-next year or into late next year as far as when we'll see data from that study. The market opportunity, we see it as similar to selexipag and probably the same revenue opportunity. It's a once-a-day tablet that's titratable, which is a big advantage over selexipag, which is not titratable. So in the paradigm of treatment, it's going to be another option really that we're going to put in the hands of physicians to treat PAH.

Got it. Great. So I wanted to spend a little bit of time as well thinking about organ manufacturing and xenotransplantation, which is also an exciting area you guys are focusing on. So maybe this is a question I've gotten from investors that are newer to this area of your business. So could you just walk us through some of the main catalysts or data events that are coming up in the next year or 2 and, ballpark, when do you think you could approach doing human clinical trials of a larger size?

Sure, sure. So I think probably everyone is familiar with the 2 heart transplants that we've done in partnership with the University of Maryland. And those were both very exciting events. And I'll just comment that we owe both the patients who participated in those procedures, everything as far as their contributions to science. So that's been progressing well. As far as xenoheart and xenokidney, which are leading the edge on the xenotransplantation, both are in the pre-IND phase right now. And what's happening right now is we're doing nonhuman primate studies that we've agreed upon with the agency that will be required to file an IND. So our partner on the kidney side is Johns Hopkins University, and they have completed the prerequisite nonhuman primate studies and they're working on summarizing those. And I think as far as kidney, which will probably be first, we would expect to be ready to file an IND perhaps as early as the end of this year, likely to be after the first of the year, early 2025, and we could enroll our first patient then sometime in 2025. Now in parallel to that, we have completed construction of a clinical designated pathogen-free facility in Western Virginia. And this facility will house the genetically modified pigs that we will use to produce the organs for this clinical study. That facility is completed. We're in the process of introducing pigs into that facility, and we'll begin breeding those pigs in second quarter in preparation for having organs available. So in summary, the kidney program is going to be probably first out of the gate, and look to see an IND filing sometime hopefully in the next 12 months. It would be our goal to try to do it by the end of the year, but that's probably a stretched goal, but likely in the next 12 months. Now heart is tailing that. Again, we're in the middle of the nonhuman primate studies. We're not done with those yet. We need to acquire some more data and do some more work. Once those are done, we'll be filing an IND for that as well. Now these are all with the 10-gene pig that we've talked about. So with the 4 pig genes knocked out and the 6 human genes knocked in. So we're pretty excited about that. But the market opportunities are massive. Just to give you some flavor there, there are 450,000 people in the U.S. on dialysis today that are not eligible for kidney transplant. So the market is gigantic. And this underlies some of our comments about reserving capital for commercial facilities to support a commercial xeno organ program.

Got it. And so digging in a little bit more, what are some of the proof points that you're watching for as you continue to progress with these different programs to give you more confidence in stepping forward in larger trials, et cetera?

Well, key to that is the nonhuman primate work that we're doing. And that's really what the agency is asking us for to provide them to give them the confidence to allow us to proceed into a human trial. Of course, there's been the work done already at the University of Maryland that's giving us confidence that the heart has a very strong future. We'd like to note that with those particular patients, they were both very ill and their survival to what they did was a miracle in itself. We've seen a lot of good data published with kidney with brain-dead deceased donors. We had an 8-week study completed at NYU with a brain-dead donor, which was really -- only intended to go 4 weeks, but the data was so good that we were allowed to keep the study going for an additional 4 weeks. And we terminated it. It could have kept going, we terminated it by request of the family who was ready to receive the body back. So the data is very compelling right now. And we're hopeful that once the kidney program starts and we start to see positive results, it will really pick up a lot of momentum.

Got it. Great. So you also recently acquired Miromatrix, I think, at the end of last year. So how should investors think about the Miromatrix programs and how they integrate into your overall portfolio?

Yes. You'll hear a lot on our quarterly calls, and Martine will say this a lot, is shots on goal. And Miromatrix is another shot on goal for us. They're working on an external -- right now, they're working on an external liver. And they also have programs for internal liver and kidney. Just not too long ago, they announced the approval of the first bioengineered organ IND, which is the miroliverELAP. It's going to be a small study, I think, 10 to 14 patients, around that, where -- and it's a non-registration study, so it's more of a safety study to start, where they'll be evaluated after 2 days and then checked again after 30 days. But it's the first bioengineered organ approval, a major, major milestone, a huge achievement for the Miromatrix team.

And the study is actually looking at 5 completers and we'll have up to 15 patients in the study.

Nice. Sounds good. So you're talking about multiple different programs going on in your xenotransplantation portfolio and different modalities, et cetera. I have a little bit of a technical question. So I've gotten this before from an investor. So can the same animal be used to grow multiple organs simultaneously? Or is there one organ per animal? Just like talk a little bit about the logistics there.

Well, yes, the logistics are complicated, as you can imagine. In theory, and I'd say, in an ideal world, we would harvest all the organs, both kidneys and heart, from an animal and be able to use them. And certainly, probably in a high demand, we'll be able to do that. Initially, probably not because people will have to be ready to receive those organs at the same time and managing that will be difficult out of the gate. But I imagine in a mature commercial setting, we'll be able to maximize use of organs to the best we can. But initially, it's probably going to start off where we're not able to do that. But if you look at how everything will work commercially, these facilities, really when it comes down to a square footage. The more pigs that you have, the more square footage you need. There's no efficiencies like when you're working with equipment, you just buy higher capacity equipment. It doesn't work that way. So a pig needs space. And as you look at our facilities, the facility we have in Western Virginia is capable of housing 100 pigs and will kick off about 100 organs a year. For example, in a commercial setting, we're looking at things that are 10x that, 20x that. These are going to be big capital investments. We'll have to have a pretty sophisticated logistics network. You've heard Martine talk about drone transport, electric vertical takeoff and landing vehicles that will be used to help get the organs to the transplant centers. So a lot of discussion and planning going on there. But it will be complicated. But in the end, it's our intent to use as much as the animal as we can at any given time.

A lot going on. And wanted to also ask from the regulatory side, thinking about organ transplants, et cetera, how your interaction has been so far with the FDA? And what do you expect going forward? I know this is a little bit of uncharted territory, but any insights you can share.

Well, we've been talking with the FDA for a number of years now, and they've been very supportive, and they understand the potential impact that this program will have on health care. So it's really about establishing dialogue with them, helping them satisfy their needs, educating them on our science. Certainly, the acquisition of Miromatrix is helping that with their recent IND approval. So we feel we're really leading the charge in the regenerative medicine space by achieving these milestones and establishing really the procedures and policies that they need to have in place. Again, I'll go back to the DPF that we recently constructed in Virginia. That's the first building of its kind in the world. We have to work with them to establish what's necessary. And although it's just housing pigs, it's actually a very sophisticated building. It has to protect the pigs inside of it from us. So you can imagine that it has some things that have never been done before. And the contents of that building are very valuable to us. These pigs have to be bred internally to the building. So you can't replace them next day. You can't call a vendor and say, "Send me another pig." They take months to produce and to get to the age where we can harvest the organs from them takes a year.

Yes. Got it. So in the last couple of minutes, I want to zoom out a little and ask about, so you talked about a defined budget algorithm of how you approach development. And I was curious if you could just walk us through some of your capital allocation goals for the next couple of years and how you're thinking about investment.

Sure, sure. So we're very disciplined with how we spend our money, and it's really -- it's a simple algorithm that forces that discipline, which is we don't spend more than half of prior year revenue in any given year. And that's caused us to make tough decisions and really focus on what's important to us. As far as how we deploy that capital, really it's about investing in our R&D efforts, saving for capital allocation to support commercialization. And then shareholder return on top of that. So all these things come into play. We've talked extensively about the capital investment that's going to be needed to support the xeno programs. And these are going to be $1 billion facilities that will also return billions of dollars in revenue. We're establishing which milestones we want to achieve before we pull that trigger on building these facilities. But as we progress into 2025 when we expect to start the kidney clinical study, and we'll soon get data after that. This is an open-label study. So we're going to be very aware of what's happening as it's happening. As we start to accumulate that data and gain confidence that we're ready to make that investment, we will go ahead and do that.

Sounds good. And then the last minute and maybe a question for both of you, what do you think are the most underappreciated aspects of the United Therapeutics story so far?

That's a good question. I think it's really the combination of these 2 businesses that actually make a lot of sense. They look like they're very different from an investor standpoint, this treprostinil base business that is highly cash generating versus the organ business that is highly -- high risk, high return and very capital-intensive potentially in the future. And so I think it's actually they fit really well together, because the mission of this company was to find a cure for PAH. And the only cure is a lung transplant for these patients. And lungs are part of the organ program. They're not first to come out. But this is the embodiment of our founders' dream in terms of finding a cure for end-stage organ disease.

Yes. And I'm going to agree with that fully. I think people struggle with some of the technology because it's so new, especially in the regenerative medicine space. This was science fiction to many of us 20 years ago. And the fact that we're here and talking about putting a genetically modified pig heart into a person and that person actually living, it's an incredible story, honestly. And there's been no business like it. So I think there's been a hard time to get their arms around that. But it's becoming very real. And there's tangible things happening now. It's not just talk. So I think we're hopeful people start to recognize the efforts that we've made really over the last dozen years in research of this area, that it's finally come to this point, and we'll be able to start saving some lives in this space that's really underserved.

Sounds great. Looking forward to future updates. So thanks again for both of you coming out.

Thank you.

Thank you.

Yes. I think we're out of time.