United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

[Audio Gap] and James Edgemond, CFO. So thank you for being here.

Thanks, Ben. I think maybe just to kind of kick us off, just kind of start by giving us a quick overview of sort of the business and some of the near-term events that we should be focused on?

Sure, Ben. Glad to do so. United Therapeutics is right now at a major inflection point where we are rolling out 14 new products over the next few years that will provide us, we believe, somewhere between $50 billion to $100 billion a year in pharma revenue, moving us to the very top tier of pharma companies. And I'll maybe march through these new products, Ben quickly. So the first one that I think most people are aware, is the NDA that we submitted a few months ago and now has its PDUFA timing, which is nebulized Tyvaso for idiopathic pulmonary fibrosis. In this pivotal trial, it produced far and away the best clinical trial data ever from any registration study for pulmonary fibrosis. Coming right behind that is our development of that same product for our progressive pulmonary fibrosis or PPF which is a 3x larger indication, and we just announced about a month ago or so that we had fully enrolled that study already. So that's on its way for its 12-month endpoint measurement. Then right behind those products, we have our dry powder inhaler for both IPF and for PPF. Then right behind those products and all of these coming at a very rapid clip of more than one new product introduction per year. We have a cageless product called Coles Trans for both ILD, PPF and IPF. And that product is a truly amazing one in terms of its convenience and its ability to get rid of the #1 side effect that patients in these indications have. Coming right behind that product is a once-daily inhalation product called Roli, which we're developing, again, in different indications, ILD, IPF and PPF. So right there, Albanis new products over the next few years. And there's even more. The one that I have to say, people often ask me, which is my favorite, probably my favorite is the Tresmy product for PH COPD. This is a very debilitating condition. It's a small proportion of people with COPD for whom their pulmonary hypertension is all out of proportion and they are the people with the severest disease and the rapid decline into fatality. Our costless trans for COPD can address a market of somewhere between 400,000 and 800,000 patients in the U.S. alone. And now moving over to pulmonary hypertension. We already filed an NDA, have a PDUFA date for our generality product, once daily appeal for pulmonary hypertension, again, produced the best clinical trial data of any product in pulmonary hypertension ever that one will be queued up for FDA approval in June of next year. And then right on its heels, we have what we call triple generally which is that once-daily pill, together with the 2 background medications, we demonstrated its efficacy over PDE5 and the EPRA. That takes us up to 12 new products. And then last but not least, we've got 2 very, very exciting products to roll out on top of all of that. We have a treprostinil iloprost combination product that can be used as a p.r.n. meaning that you just use this product as necessary during the course of the day. And it doesn't matter if your background therapy is one of our therapies or one of our competitors' therapies. This will be the first rescue inhaler for pulmonary hypertension. So you add all of these 14 products up, you're looking at 0.5 million patients with PH COPD -- you're looking at 400,000 patients with the pulmonary fibrosis type of conditions, another 100,000 patients with the pulmonary hypertension conditions. So it's 1 million addressable patients, all million should be captured by one product or another. But even with a 50% capture rate, we're looking at $50 billion in pharmaceutical revenue over the next few years. That's really the reason, Ben, that we are excited to announce at this conference at this Wells Fargo conference that we have done an accelerated share repurchase of -- with $0.5 billion bringing up our total repurchases just in the past near term to upwards of $4 billion. And the reason for that is it just makes no sense to us at all that the company is at a market cap of around $20 billion when based on produced clinical trial revenues, filed NDAs, best results in the industry, multiple moats in terms of intellectual property protection to the 2040s, composition of matter protection for ralinepag to the 2040s. We have a super clear straight shot at $50 billion to $100 billion in pharmaceutical revenue.

Okay. That's great. Well, let's start with -- so a lot of areas to dig into. Let's start with PAH and PHI -- so there's -- your products are out there, there's other products that are in development or on the market now. So I guess the question is, how do you see the PAH market evolving? -- with your products and competitors? And where do you see that kind of end state?

I see the market evolving to a place where the physician will ask themselves. Do I want to slow my patient's rate of decline? Or do I want to provide them actual clinical improvement? Only one product out of the 12, 13, 14, I've actually lost track of products approved in pulmonary hypertension has shown in its Phase III clinical trial data, actual probability of having a clinical improvement, and that's this product we call General with the trade name generality. Furthermore, that product is the easiest to take just one pill once a day. So I think physicians are going to move their patients from whatever other therapies they are on and to just one pill once a day to actually get a clinical improvement in their patients. Now some physicians will say, well, my patience has been on a background PD5 or ETRA for a long time. And that's why right on the heels of generalities approval, we plan to file for approval of what we call triple generally, which is a single pill in which the generality has been blended together in a very specific technical way with a PD5 and the ETRA, so you get three mechanisms of action, endothelin receptor antagonists, phosphodiesterase inhibition and the super prostacyclin activity that GenraLDi offers. One pill once a day, 3 MOAs. I think more than 80% of all the PH patients are going to be on that certainly by the end of this decade.

Okay. That's fantastic. What are the time lines for that, the triple.

So that one, the NDA we filed for generally and we received an acceptance of filing from the FDA and a PDUFA date, best of my recollection, June 27 of next year. And then coming right on the heels of that would be a filing of triple generality. And we think because the basic generality would have already been approved, that we would have a rapid turnaround from the FDA on the triple generality, not more than 12 to 24 months later. So well in time for those. First, we would get the physicians that say, "Well, this pill demonstrated improvement even in patients who were not on background therapy, so I'm going to go ahead and take all my newly diagnosed patients and put them in generality." But for other physicians that say, well, the appeal -- the generality was also proven very effective in patients on background therapy I'd say to them, look, in addition to your, say, on ambrisentan pill that you're taking and maybe you're one Adcirca pill. I want you to just take a third peel of generality for so for them, it will be 3 pills, but just once a day, which is a tremendous relief and knowing that those will be the only patients in pulmonary hypertension that have a probability of clinical improvement, that's the holy grail. I mean, frankly, Ben, I started this patient -- this business to save my daughter's life who has pulmonary hypertension. That's well known on the web. And I feel like for the first time ever, like hope is better than ever that you'll actually be able to improve instead of just getting weaker and weaker.

That's amazing. Very cool. Well, let me turn now to the of the inhalable franchise. So with Tyvaso, we've seen some decline kind of quarter-over-quarter. Do you envision the soft mist inhaler in that format, maybe returning that sort of franchise back to growth?

I absolutely do, Bill -- Ben, sorry about that. The softness inhaler is a truly remarkable product. And it will allow a patient with just 4 puffs a day and when I say 4 pubs a day, I mean like 1 puff 4 times a day. So it's vastly easier for the patient to take to be able to get their treprostinil medicine down into the deep lung without the cough. So as a coughless product, we call it resi for treprostinil softness inhaler. And I think that this product is going to kind of sweep the floors with the competition. I mean, I -- just to be very blunt, it's such a more convenient product. Now our goal is to first get this product approved in ILD and then to move this product into IPF, which is, frankly, about probably 4x, maybe even a 5x larger market and then move it into PPF, which, as you know, we just completely enrolled our nebulized product in that PPF franchise, which is around 300,000 patients. So the forecasts are so great for this coughless product that we've actually had to open up 2 separate manufacturing sites to be sure that we have an adequate clinical trial supply for the entire market.

Okay. That's fantastic. And actually, I'm glad you mentioned that because I think we're all looking forward to the type base nebulizer and the IPF opportunity. But that's put the cart before the horse too much, but we're also kind of looking at what are the other formats to kind of go that direction. What have you said about the path to getting some of these other formats, such as the DPI, such as the softness inhaler into IP, what kind of studies would you need to run?

Yes. So they all run in a kind of somewhat similar algorithm. And that algorithm is that what we call it UT, United Therapeutics, we have a kind of mantra inside the company. . And if you ask anybody working in the company, any of the 2,000 of us say, what's the main mantra of the company, everyone will say, approve and then improve, proven and improve and well, it's not a litmus test, but it makes so much logical sense to them that they get it. So first, you get treprostinil nebulized approved for IPF. Now why that one first? Well, treprostinil is already approved in ILD and nebulized treprostinil is already approved in ILD. The FDA is very familiar with it. It already demonstrated efficacy in this patient population in the INCREASE trial back before the TETON trial. The FDA is familiar with the molecule, familiar with the device we presented to them. They said, yes, this is like a 12-month endpoint go forward. And we went for it. Then why next -- how can you improve it? Well, one way to improve it is instead of having a kind of large nebulizer, why not a little DPI that you can stick in your pocket. You've seen the MannKind -- it's like a whistle reeling above the size of a whistle. So we went to the FDA. Now why the DPI next, they had already approved it for ILD. They felt very comfortable with its safety and with its efficacy. So we said to them, we'd like to next develop this into IPF. Now the FDA then makes an analysis. Okay, well, what type of bridging study or efficacy study should we need in this new indication, what type of safety data and different parts of the FDA will ordinarily look at things based on their own area of competency. So you're going to have the cardiorenal division, look at things one way and the pulmonary division, look at things another way. United Therapeutics respects the FDA and all of their competencies. So we meet with them and we take the guidance, whether it's like a smaller bioequivalency or bigger, whatever it is that they want. We do the development that each part of the wants us to do. And I think that the track record with our Tyvaso DPI has shown that it's so similar with nebulized DPI, that we're going to have a very fast track route for that Tyvaso DPI into first IPF and then after we could get a nebulized Tyvaso approval in PPF, then the PPF. Then the next thing is the SMI. After you say, "Wow, that's something new. You did we didn't previously approved an SMI, but we did previously approve Treprostinil. And now we want to see should we do the transmin as bioequivalence or bridging, what data do we need? And again, we have these discussions with the FDA and the reason that UT is always able to do the shortest path for each new drug device combination is we're very careful to change just one thing at a time. We don't change like multiple things at that time. just change one thing at a time. And that's why I can save you confidently that I believe all of those products that we just reviewed will all be in the marketplace this decade, this 2020s and we'll be making major contributions to taking us towards that $50 billion of pharmaceutical revenue before the end of this decade.

Okay. Well, that's great. And maybe we could talk a little bit about the IPF opportunity specifically. So I guess the question is, what do you envision that commercial opportunity kind of being? And I think the context that a lot of us have here is we've watched Jaza, which is sort of a new launch into IPF. It's been a while since we've seen a new launch in IPF. But I guess looking at that and kind of the adoption curve, like what should we expect with Tyvaso in IPF?

Yes, Cascade was an awesome introduction to the space. And by the way, we have now Jaza patients in our open-label extension patients of nebulized Tyvaso. So we are already showing the ability to enroll patients and show a kind of a combinatorial benefit of Tyvaso on top of Jascade, as we showed beyond the doubt with intenamide and pirfenidone. So the key thing to look at here is what's the size of the market, as you said, Ben, and there's some bouncing around, but people estimated something like 100,000 to 150,000 patients in the United States with IPF. And what are some of the limiting factors in addressing that population? Well, with nintenamide and pirfenidone, there were some pretty challenging GI side effects that caused a very large amount of dropout. So you have to factor all of that in. And then we have to kind of -- we're in the casino here, right, some kind of casino -- so we have to put a bet on the table in that we can't just snap our fingers and have thousands of patient drug -- patient doses available, we have to spend money to build up a launch inventory based on how many patients we think we're going to ramp to during the first year. It could take a few months to build up products. So we try to say, okay, we're getting ready to launch. Things are looking great for the FDA approval, how do we want to launch with? And that gets to your question, right? We put a bet -- we actually made a $100 million bet. We bet that we would need 10,000 patient starter kits for the first year of product launch. So that's what we're looking for, for the first year. And I think that's not dissimilar from what Jascade is looking at. And I think it's not unreasonable in a patient population on 100,000 patients to be able to capture something like 10% of that population in the first year especially when you have the amazing data that we have in Ketan and 2 of 100 millers of oxygen improvement from baseline.

Very good. And on PPF, were you surprised of how fast that study enrolled.

Long away blowing away. Then I have never seen in the pharmaceutical industry that a company enrolls a trial faster than like the business people thought it was going to be enrolled. And then even their clinical people. So it's usually like you say, hey, we're falling below the forecast we gave to -- the Street for enrollment. This time, the clinical drug development people said multiple times, Martin, we have to move the schedule to the left. It's like, what? I didn't know clinical trial schedules could move to the left. I thought they only moved to the right. So it was astonishing but the physicians were just pushing patients on the drug after they saw the remarkable effect that Tivanebulized Tyvaso had on their IPF patients and they know these poor PPF patients, I mean, mean survival just ask your AI, it's 3 to 5 years. I mean it's horrible. So they're really pushing their patients on the PPF study. So I was blown away surprised Ben.

And so what does that mean from the commercial perspective? Like if you look at some of these drugs that have both an IPF and a PPF approval, you see a disproportionate amount of drug sales from, I believe, IPF, but the numbers of patients that have PPF are a lot higher. So what do you see as sort of the addressable kind of PPF market? And how does that compare to your thoughts on IPF?

Yes. So I think the starting point is that it's very important that things be on label to be able to be accessible to the patients. First of all, physicians will not even be all that well educated above things that are not on label. Secondly, it's going to be difficult, if not impossible, to get reimbursement for a diagnosis, which is not on label. So the FDA themselves required us to do a separate study for IPF and PPF because the pulmonary division feels that there are different clinical aspects of the IPF and PPF patient population that requires different clinical data sets for each patient population. So I think they did the right thing requiring a separate clinical trial for PPF. I'm very hopeful that we're going to have superb results. I will say that my hope in addition to, based on the physicians rapidly enrolling the study is based on our digital AI lung model where we have run this patient population as we did our previous IPF population and shown a high likelihood of successful results. It's also based on the fact that in our Phase II trial, the INCREASE trial that we did. There were PPF patients in that trial who did just as well as the IPF patients. Still, the FDA made us do a separate IPF trial and frankly, I was nervous about doing a parallel PPF trial before it was proven in IPF. So in retrospect, you could say I was too cautious and I would say, guilty as charged. But nevertheless, that's the way it happened. And now I feel very confident about the results in the PPF trial. And I think finally, this population will get the drug they need with the FDA approval. It will be on label specifically for PPF and insurers will not bulk because their diagnosis will match what the label is for.

Okay. Excellent. I want to turn now to ralinepag, and you gave some helpful comments early on about through the efficacy profile of the oral. But the format -- the DPI format that you're developing, I guess, number one, is it fair to assume that, that is going to be developed kind of along the same sort of pattern as Tyvaso in terms of the number of indications and sort of the path forward.

Yes, Ben. So we're going to follow the same what you could as call the UT algorithm, which is approved and then improve. So the approved is PO once daily which, as I mentioned, we have the PDUFA date for that coming next year. And then the improve is how can we get this to patients that really need to take their therapy via inhalation route so that they don't get into a realm of VQ mismatch between cardio output and inflation. So that improved requires an inhalation formulation. So we work very hard with our great partners, MannKind, and we developed like an amazing inhalation formulation which with once-daily pharmacokinetics will allow us to improve on Tyvaso DPI because the Tyvaso DPI, we got it approved first for ILD next, we get approved for IPF. But now we want to improve on that by having it once daily instead of 4 times a day. So the same proven and improved algorithm. So we're going to apply the rod pie as a once-daily inhalation solution for ILD, IPF and and PPF, so that will be 3 more labels there. We are so bullish on this one, Ben, that once again to say like we kind of put our money where our mouth is, especially in this beautiful Encore resort that you have here, that we have built out a 50,000 patient annual production facility dedicated for rod pie. That's the once-daily inhalation formulation of -- it will have its ribbon-cutting October of this year. And thereafter, it will ramp up during calendar year '27, to be FDA approved as a side of production. You have to have your safety efficacy and your production all approved by the FDA. So we should have been approved by the -- all that in the bag by the FDA by the end of '27 could possibly roll into '28. And thereafter, we'd be able to launch a once daily inhalation therapy with the best in the industry, pharmacokinetics, very important, but not everybody understands the best in the industry, pharmacodynamics because the fact is ralinepag is a better molecule than treprostinil. We proved that in our outcome study, and we will prove that also in our studies for the inhalation version of the product. So you have better pharmacokinetics, better pharmacodynamics. And I think that this rod pie is just going to sweep through the IPF and the PPF landscape. And I will probably end up outstripping the 50,000 production capacity of this plant, but that will be a high-class problem.