United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. My name is Jess Fye, large-cap biotech analyst at JPMorgan, and we're continuing the 44th Annual JPMorgan Healthcare Conference today with United Therapeutics. I'm joined up here by the company's Chair and CEO, Dr. Martine Rothblatt, who's going to give a presentation on the business, then we're going to go into some Q&A. If you're in the room and you want to ask a question, just raise your hand, and then I'll bring you a microphone. [Operator Instructions] So with that, let me turn it over to Martine.

Thank you, Jess. Thanks, Jess, and thanks, everybody at JPMorgan for coming to the presentation. I'm going to show quite a few slides today and say a lot of words. But I think if you leave here with just 2 words, you will understand United Therapeutics completely. And those 2 words are IPF, that's 1 word. IPF. And the second word is super-prostacyclin, that too is just 1 word, hyphenated super-prostacyclin. And I think if you just come away with those 2 words, you will understand the amazing potential that United Therapeutics has. Now what do those 2 words mean? IPF is an acronym for idiopathic pulmonary fibrosis. And this is a fatal condition that robs patients of their ability to breathe. This IPF indication has been known to medicine for many, many decades. And in all that time, there have just been 2 medicines widely approved for that condition. One new medicine just recently approved in a couple of jurisdictions. And none of those 3 medicines has made any truly significant impact on the progression of pulmonary fibrosis. In fact, several years ago, when I tried to purchase for United Therapeutics, the company promoting 1 of those 2 -- 1 of those medicines, a company's called [ NImmune ]. Our Scientific Advisory Board unanimously told me not to purchase the medicine because in their experience, it had such a de minimis effect on their patients with pulmonary fibrosis that company ended up being able to make a pretty good chunk of revenues with that product, but the Scientific Advisory Board's opinion, which was full of KOL pulmonologists was what it was. The other word is super-prostacyclin. So what does that mean? Prostacyclin is an endogenous molecule, meaning it's a molecule that's made based on coding in your DNA and is absolutely essential to life. It keeps all of a person's blood vessels patent and open and free of sticky platelets and among other things, some of which science is just beginning to learn. So some like 30 or so years ago, Nobel Prize was granted to the Chairman of our Scientific Advisory Board, Sir John Vane for discovering the mechanisms of action behind prostacyclin and other drugs that act on downstream of phospholipids. And then that same Sir John Vane in his laboratories at Burl's welcome, was able to develop a stable analog, meaning an artificial kind of tweaked version of that prostacyclin molecule. And that molecule ultimately became the bedrock of United Therapeutics. And we have turned that molecule into a number of life-saving medicines for patients. They go by the names of Remodulin, Tyvaso, Orenitram and other companies as well have developed this treprostinil molecule into good medicines for patients. There have also been other variants of the prostacyclin molecule or the prostacyclin pathway that have been developed by other companies. And these have also been shown to be a benefit to patients with pulmonary hypertension. However, all of these various analogs at the endogenous molecule and certainly the endogenous molecule itself, have severe therapeutic pharmacokinetic and pharmodynamic limitations that don't allow them to reach the full potential of being able to give the patients the full measure of health that would be possible from modulating the prostacyclin pathway. We at United Therapeutics have developed a next-generation prostacyclin molecule called ralinepag, which is what I call a super-prostacyclin because it has the best and far away the only truly long-lasting pharmacokinetic life. It has the most potent pharmacodynamic effect on the prostacyclin receptor pathways. And even though we will just unblind the Phase III trial within the next 3 months, it has also shown an open-label extension data from patients from that trial a physiologic effect which is above and beyond anything that we have seen with any other -- of all of these 30 years of molecules in prostacyclin. So IPF, click. Super prostacyclin, click. You got the United Therapeutic story for the next several years. The -- we have been able to reach this threshold of developing what I believe will become quickly recognized as the best product for IPF or pulmonary fibrosis as a result of a trial that we unblinded just -- I guess, it was about 3 months ago now called the TETON 2 trial. And this trial of inhaled Tyvaso, one of our medicines in patients with IPF both patients with IPF who are on these don't work so good therapies that I mentioned earlier or on no background therapy at all had such a dramatic improvement in their forced vital capacity, which is the widely accepted measure of how well patients with pulmonary fibrosis are doing that every single physician we have spoken to key opinion leaders, everybody has said, this is a game changer in pulmonary fibrosis and feel extremely confident that this will become the most prescribed medicine in IPF. Now just a word about IPF. Over all of these years that you see on this chart, we have received not $1 of revenue, no growth in patients, nothing from IPF. Yet it is an indication with just in the United States alone, a prevalence of about 100,000 patients, and most of them unfortunately die in just a handful of years. So I believe that we will quickly make this kind of revenue course that you see on this chart completely irrelevant by ramping Tyvaso into this completely virgin 100,000 patient population where the data shows, it is above and beyond, far better than any other medicines currently approved in that indication. The other interesting thing to look at this chart over these past many years, you see this continued growth. All of this is with the first generation somewhat problematic prostacyclins, prostacyclin analogs, prostacyclin receptor antagonists that have been out there in the market. This is the kind of revenues the therapeutics have been able to do. All of this past revenue growth, I think, is truly irrelevant because the vast majority of all of these patients as well as all of the patients who are not in our medicines are going to migrate over to the super prostacyclin, which is much simpler to take just 1 pill a day, much more effective in the prostacyclin receptor pathway. And as I mentioned, has already shown physiologic benefits which are better than anything else we've ever seen before. Now we will unblind that trial, as mentioned just in the next 3 months. So you're not going to have to wait very long to see it. And assuming that the data are positive, which I'll show you a little inkling in a moment what those data might look like, then you will see us filing for approval this summer, hopefully, approval from the FDA next year. And then this type of 20-year history that's shown on the chart here would really just be the starting point for a takeoff in revenues that would be 2, 3, maybe even 4x the level that you see here in this chart. We at United Therapeutics have done so much to make the most out of what we have. Here's an example of how difficult the current generations of prostacyclins are. They are so hard to manage that this patient here has to take the prostacyclin by an infused delivery 24 hours a day, 365 days a year with no interruption. With this new super prostacyclin that we'll be introducing, this entire delivery system can be replaced with just 1 pill once a day and greater affinity within the prostacyclin receptors that line the pulmonary vasculature and airways in the lung. So it's going to be a game changer. And when people talk about like what made the United Therapeutics of 2026 to the 2030s, so much different than what happened before. They're going to say 1 word is going to be the super-prostacyclin, ralinepag and the other word will be they have become the go-to drug in IPF. United Therapeutics, even though we are focused on these 2 words and the 2 words I want you to keep in mind, it's not that we don't also concentrate on other indications. And this is where I think a lot of our business development growth will be coming. We always have kind of a philosophy to do our best to leave no patient behind. In this chart, you see the logos of a couple of our products that are addressed to orphan populations. The one on the right is the one I'll speak to for a moment here while we talk about business development. This drug is approved by the FDA and by the regulatory authorities in other jurisdictions for the treatment of neuroblastoma. Neuroblastoma is an almost universally fatal pediatric cancer of the nervous system. But after Unituxin was approved and for those patients to whom it was given, half of the patients completely banquet their neuroblastoma and have gone on to live a normal life with no recurrence of their cancer even 5 and more years after the cancer was first diagnosed, a true cure for these patients with neuroblastoma. So we've now built up this indication into a position of leadership among pediatric oncology centers. And when people ask me, Martine, I understand about IPF, you're going to cross that I understand about the super-prostacyclin and you're going to be a go-to drug. What are you doing in new business development, this orphan oncology area is one of the key areas that we're looking at for new business development to try to leverage our success with neuroblastoma into other pediatric and orphan cancers. Now the Tyvaso drug, which proved itself to be so remarkably successful in IPF. And it's very interesting that we had run our Phase III trial in a very detailed computational biology model, an AI model of the human lung that we've spent the past 5 years developing at United Therapeutics. We call it the CLIMB model, CLIMB being an acronym for Computational Laboratory for In Silico Molecular Biology. In other words, instead of running trials in vivo, you can run them in silico if you accurately model all the aspects of the in vivo entity, which we have with regard to the lung. And when we did an unblinding of our in silico model of pulmonary fibrosis with the Tyvaso drug that you see here. We came up with a measure of its efficacy in terms of its improvement in forced vital capacity, again, the main measure, that was within 30 milliliters of oxygen of the actual in vivo pivotal trial that we later unblinded. But what's really fascinating is the unblinded data was about 60 milliliters of oxygen better than the other competitive drugs that are out there in the market. So our -- this is to say that our in silico models are pretty damn good. And even if the FDA had approved something based on the in silico model, which I think will start happening within the next decade or so, it would have been far better than the drugs that are already out there. But nevertheless, we did prove it in the in vivo model. By the way, for those geeks of you who are in the audience, it took us 3 years to conduct the in vivo model in hundreds of patients with pulmonary hypertension. We ran 54 pivotal trials of the in silico model in just 48 hours. So imagine the future when you can run so many clinical trials in such a fast period of time and get such accurate results as we got for pulmonary fibrosis. This chart shows a next-generation Tyvaso device that we do with UT. One of our core competencies at UT is something that we call drug device combination products. And this is where we combine a drug with a device to make the drug do something much better than it could do without the device. And it also adds a lot of proprietary IP to the drug which allows us to reinvest and develop yet better drug device combinations. I'm looking over here at one of the head of the United Therapeutics [ Contworks ], where Pat Poisson has about a dozen different advanced devices like this. He's a genius and his team in is a genius at turning our molecules into effectively brand-new pharmacokinetic and even pharmacodynamic properties of drugs based on their passage through these unique types of delivery devices. So that's something that is, right now, in fact, it's our best-selling drug in the United States for pulmonary hypertension. And I think you're going to see this in IPF as well. In terms of pulmonary hypertension, I think it is going to be overtaken by the super prostacyclin ralinepag that I referred to earlier in terms of our best-selling drug. But it's -- we never mind lapping ourselves to create better health care for patients. I think that's what it's all about. Here, you see an example of why Tyvaso DPI worked so well compared to other type of devices, it reaches much further into the distal portions of the lung. And for those of you who are well versed in pulmonary biology, you probably know that the lung is a branching structure, so it's like 2, 4, 8, 16, 32 and you know very quickly, you get up into the millions of tiny, tiny arterials. And it's in those are far distal portions, meaning the tiny, tiny ones that may be like 10 millimeters in diameter micrometers and diameter -- sorry, about 10 micrometers in diameter that the pulmonary hypertension takes hold. So you need a drug that can get down to the far distal portions which the Tyvaso DPI does -- that device does it far better than any other product out there. And no doubt, that's why it's far and away the best selling DPI type of device. Now I mentioned to you that when you take Tyvaso into pulmonary fibrosis, you get dramatically better results than have ever been seen before. And here, you see the data from the -- what I promised you take a peek at from TETON 2. This is the unblinded data from the TETON 2 trial, which was completed in the fourth quarter of last year. And you can see that the patients on drug did far better [ point triple 01P ] value than the patients who are on placebo. And we are now completing a confirmatory study. In fact, it's fully enrolled. And it will be unblinded in the first half of this year. So sometime in the next 2, 3, 4, 5 months. And we expect that trial that's called the TETON 1 trial. We expect that trial to pretty much like overlay with this data. Our -- certainly, our computational model implies with overlay with this data. And that will be amazing because then we'll submit it for approval, I think the FDA will be very, very excited to grant an approval. And finally, for the 100,000 patients literally suffering the death from pulmonary fibrosis there will be like a life raft -- a lifeboat that they could jump on to, which will be Tyvaso. And it should definitely at minimum, greatly improve their quality of life, improve their oxygen saturation, which will logically improve their longevity of life as well. So super, super excited about this, and we have every reason to expect that we should be able to garner onto this drug literally tens of thousands of brand new patients within the 2, 3, 4 years after it's launched. And we have been building up our inventory of Tyvaso inhalers so that we have an adequate supply of drugs and devices to take -- stay on top of literally a hockey stick launch into the IPF indication. I also promised you a deep peak at the super-prostacyclin, ralinepag. Here you see some data this trial, again, is still blinded. We won't see the unblinded data until the next 2 or 3 months from now. So it's very exciting. 2 major news events in the same year. Neither of them terribly risky, very largely derisked by now. But here, you see that the ralinepag in the open-label extension study. All of this little data might not be visible to everybody in the back of the room. But basically, what it shows is that in the -- for the people who left the drug in the open-label extension phase and then went on to the drug itself, their improvement in their 6-minute walk continued dramatically and was maintained out to 2 years here with an improvement level of just about 40 meters of 6-minute walk distance, which you almost never see in any of the first-generation prostacyclin drugs. So this is the beauty of our pharmaceutical industries. We can do these next-generation drugs and have like kind of step function improvements in the exercise performance and the physiological health of the patients we treat. So again, this kind of open-label extension data very largely derisk this product. And we believe that it will become the most prescribed medicine for pulmonary hypertension. Right now, there's about 50,000 patients in the U.S. in the U.S. with some form or another of a drug prescribed for their pulmonary hypertension. Most often, a drug called a PD-5 inhibitor. For those of you who are familiar with that class of drugs. They go by -- for an ED either called Cialis or Viagra and PAH. They're known that it's like Revatio or Cialis. We ourselves have had an amazing partnership with Lilly over about 15 years now. Lilly chose us above all of the other companies working on pulmonary hypertension to entrust Cialis to us. and have been exceedingly pleased with the results -- so we partnership with Lilly. And under our stewardship, that drug became the most prescribed drug for pulmonary hypertension. Now our drugs, which are also very good and great drugs and have been fantastic for UT, as you saw in the revenue steps at the beginning of my talk. Our drugs have reached about 15,000 patients, which, let's say, is around 1/3 of all the U.S. patients with pulmonary hypertension. Ralinepag, mark my words, we are going to go past 15,000, okay? We're going to become the most prescribed drug of this category for pulmonary hypertension, and that will just be humongous because if you combine this potency you have a super-prostacyclin with the known functionality and safety profile of a PD-5 inhibitor like Cialis, everybody accepts that is safe and a ETRA, which is another type of generic drug which is out there. You have a triple threat. You are addressing like the 3 predominant pathways of pulmonary hypertension. And the most potent of those will be in our momentarium, ralinepag. And then you can even overlay on top of those other drugs which have been shown to be synergistic like TGF inhibitors such as sotatercept. And there is already very, very exciting data available that shows the synergy of sotatercept to whom I might give huge kudos to Merck for their superb work on developing that drug for pulmonary hypertension and so happy to see patients who are on both that and prostacyclins doing even better than they would do on either 1 alone. It's also been somewhat in the news that United Therapeutics is trying to solve the problem for patients with pulmonary fibrosis, IPF or pulmonary hypertension, PAH, for whom all of these drugs do not work. There are always some patients that progress through. We have shown if the patient is treated at the right way in the right expert center and they get their numbers down into a safe zone. They could get into kind of a stable equilibrium and go for decades without a need for a transplant. But not every patient that's going to like fall into that treatment channel, if you will. And for those patients whose pulmonary pressures, get out of control or whose pulmonary fibrosis gets out of control, a lung transplant is the only pathway. So we began looking at several years ago at Xeno transplantation as a way to provide an unlimited number of lungs for these patients. What we found out is because the lungs have the largest colonization by immune cells especially primary immune system cells such as macrophages and these are the innate immune system, which just jump on anything right away, that we did not have success with signal transplantation in immune cells. But since we wanted to make the best use of every pig that we had to sacrifice that we genetically engineered to be used in humans. So we tried the kidneys in the hearts. And sometimes, it's like you got to do the experiment, you see the amazing results. kidneys and hearts worked great, even though the lungs didn't because of their disproportionate overload of immune cells. So we went ahead and developed our Xeno transplantation platform for xeno-kidneys, xenohearts. The FDA has now approved 2 of our clinical trials for xeno-kidneys. First patients already enrolled. Very modest requirements from the FDA just something like 3, 4 dozen patients, max is all you need for FDA approval. And as I mentioned, we're already on that clinical trial pathway. So I feel pretty confident that before the end of this decade, we'll be able to complete that clinical trial, submit the data to the FDA and obtain approval for creating an unlimited supply of transplantable kids and kidneys and hearts from these single transplantation models. We've, in fact, already built 2 commercial and 1 clinical xenotransplantation facilities, one in Houston, Texas. One in Minnesota, 1 in Virginia. So these 3 xenotransplantation production centers will be able to collectively provide well over 1,000 xenographs a year. to patients upon FDA approval. I'll note that we also are on the cusp of submitting INDs for 2 more xeno transplant studies in the xenoheart, and the, [ xenoheart ]. And so very probably within the first half of this year, knock on wood, the FDA will increase the number of approved INDs that we have in xeno from 2 to 4. And for those of you who've been following the feel quite amazing for a long time, it's quite amazing to imagine that here in 2026, there'd be 4 FDA-approved INDs for xenotransplantation, truly amazing. But for the -- we didn't forget the people with the lung problems. It's not their fault that our lungs are all full of macrophages, probably a very good thing that they are. So we decided the best solution for them would be to not insult the immune system and instead give them a salaried lung that is matched to their own DNA or at least to their own HLA type. So we do that with -- we manufacture the lung shape and we do that in a number of different ways. And then we cover that lung shape with iPSC-derived cells or HLA master bank derived cells that cover the airways of the lung and the vasculature of the lung and then we keep them breathing in the bioreactor, test them like one would do an ex vivo lung perfusion. So that's even a whole another organ transplantation pathway that should be at the stage of FDA approval, either at the end of this decade or the beginning of the next one. So all told, I think you remember the 2 words that I told you summarize UT, mostly because I know most of you are financialists and you care about the numbers. So the numbers are going to be overwhelming IPF and super-prostacyclin. So you remember those 2 words. But we do a lot more. We do exciting BD in oncology and exciting clinical development and transplantation. And I've reached the time on my clock when I need to open up the floor for questions. So thanks for your patient listening. And between myself, our President and Chief Operating Officer, Michael Benkowitz; and our Chief Financial Officer, James Edgemond, we'll be happy to answer all of the questions that you have. I urge you to answer -- to ask questions because if you don't Jess's going to ask all the questions. And her questions are much more difficult. So please ask questions.

[indiscernible] is that your IP or [indiscernible].

So very good question. So the answer is both. The specific inhaler that I showed in that image is from a third-party contractor called MannKind. And they developed that inhaler for delivering insulin for diabetics, and we reengineered it to work with Tyvaso. So that 1 is from a third-party contractor. We have actually almost finished building our own manufacturing plant for that inhaler, which will open up, begin producing stability batches for commercial launch by the end of this year, and then we'll commercially launch those products out of that company internal source next year. In addition to that, we have other devices that I mentioned in our skunkworks that are developed internally to UT, and there's not a lot that I could say with them about them right now because they are in stealth mode. I have on earnings call mentioned that I would share a lot of the details of the next-generation drug devices. After we file the NDAs for the super-prostacyclin for IPF, those NDAs will go in, in this summer. So if you watch this space by the third quarter of this year, you'll get more insight into the completely proprietary next-generation inhalers similar to the one I showed you. Next question. There's a roving mic there, if you want your question to be heard from everywhere. Going once, going twice, going Jess.

All right. So we do have a question on the iPad here on the portal. So what is the latest thinking on whether you'll need 2 trials in IPF given the potential FDA flexibility on not needing 2 trials in some cases, could you file with TETON 2 alone?

So, we're going to file with both of them because we're very, very close to having the TETON 1 data. The guidance that we've received from the FDA, which has been superior throughout this special recognition would go to the pulmonary division at the FDA. So just because like some parts of the FDA might do things 1 way in different divisions of the FDA do things a different way due to the greater complexities involved. They've guided us to do 2 studies in this indication. I would say they actually guided us extremely wisely. They guided us to include both patients on the background therapies that don't work very well and they know they don't work very well. As well as patients that are -- have given up on those background therapies. Actually, there's probably more people that have given up on those background therapies then use them because they have a very bad side effect profile associated with them. So the FDA wanted to make sure that we have data both on naive patients as well as those on background therapy, which is reflected in the IPF pivotal data that I showed you previously. So we thought about it, and we said it's just going to be like 3 months until we unblind the study. Let's just go ahead and do things right. One of our -- we have a few outages at UT. I try to keep them not too many, but one of the main adages is that there's always time to do things right. And I think the right way is to lead in the strongest possible way with 2 well-controlled pivotal studies, both demonstrating like amazing results for Tyvaso in IPF. And so that's what we're going to do.

And what are your expectations for the results in TETON 1 relative to TETON 2, particularly when you think about the availability of Tyvaso in the TETON 1 territories.

Yes. We think that the -- our results in TETON 1, just for everybody to get on the same page. So it's exactly the same trial, exactly the same protocol for TETON 1 and TETON 2. TETON 1 is done in the U.S. and TETON 2 was done outside the U.S. TETON 1 started first, that's why it was called TETON 1. TETON 2 started second. For TETON 2, we had the advantage of a CRO. I -- at the moment, I forgot this particular CRO's name, but they had just finished. They had exactly just finished doing an IPF study that unfortunately didn't turn out well for the sponsor. And so they had like dozens and dozens of IPS centers that are all ready up and rearing and they had patients that had to get off their previous therapy. So they were able to enroll very, very quickly. And that's why they beat TETON 1 for a few months. It is true that there are -- that Tyvaso is not generally available in Europe. Whereas idea is generally available in the U.S. So the people sometimes have asked, well, are you worried that the patients who did so well in Europe in TETON 2 that some of those patients actually did not really have real IPF. They actually had pulmonary hypertension and that would be -- and they didn't have anything to avail themselves of. So that little definitely bumped your statistics, whereas in the U.S., a patient with pulmonary hypertension would supposedly be able to definitely access Tyvaso so that you would have a "pure IPF alone" population in the U.S. versus in Europe. But in fact, there's absolutely nothing to back that up in all of the data. We have the background characteristics of both the TETON 1, and the TETON 2 population are exactly the same. We have various indirect indicators that can tell us whether or not there's any pulmonary fibrosis. Any pulmonary hypertension in the TETON 2 population, which there was not. So we feel 100% confident that the background is strictly comparable. And given the like hyper-strong statistics from TETON 2, we expect to have an overlap result with TETON 1. Yes, sir. I'll wait. They'll bring you a mic. There's like a home audience that wants to hear your questions.

So it's very exciting that you're going to be scaling up of these xenotransplantation facilities. How are you thinking about quality control there, particularly with the risk of porcine endogenous viruses, which obviously at scale is quite a big risk if you get that wrong.

Yes. It's a very challenging undertaking to scale up a xeno product, okay? I would say like one-on-ones earlier today, and I said, a xenograft is basically a product from hell with angel wings. So it's a product from hell because it is a very large biologic. It ain't no monoclonal antibody, okay? It's like just this massive biologic product that has -- it's nothing that the industry has ever manufactured before. So you have to give a humongous amount of attention to quality assurance and quality control processes and the whole GMP type of process. On the other hand, it's a product with angel wings because it is literally life-saving. Every one of those kidneys that we make is a life-saving product or a heart. So it's not a product you want to be afraid of because it's a challenge. And we've gone to the nth degree to make sure that we manage all the QA/QC aspects of it. Just to brag for a moment, not that past is prologue, but UT has been making biologic products for over 10 years in terms of the monoclonal antibodies. We've not had 1 single [ 483 ] from the FDA. We've been inspected numerous times, and we've been making small molecules even longer and no problem with any FDA inspections. So we have a large QA/QC group Roughly speaking, we have about 1 QA/QC person, for example, and not just that anybody is anybody, I mean, we they're highly trained and all that kind of thing for about every 2 to 3 people in manufacturing. So it's a very high overhead. We have built facilities that are designed to ensure that every product goes through superior QA/QC. I will say all of the product pigs are actually birthed inside of a designated pathogen-free facility, so it's not easy. It's extremely difficult. And what we've decided to do is even though the need for these kidneys is very, very large. We've decided to take a modular approach in building these facilities so that we always are like 5 steps ahead of any QA/QC scale-up issue that we might run into. So we build these facilities to handle a few hundred organs each one. I mentioned there's 3, so that gives us like 1,000 a year. And we own the land adjacent to these facilities, so then we can modularly add additional facilities each 1 of a scale that we can manage, scale up with full attention to QA/QC.

Last questions? No more?

[indiscernible] Can you talk about the significance of what that 60 ml delta, what it means relative to the current standard of care?

Yes. I would say it's more than double what you could see in the current standard of care. So it's quite significant patient with, I think, really, really appreciate it.

Great. Well, we're out of time, so we will stop there. Thank you.