United Therapeutics Corporation (UTHR) Earnings Call Transcript & Summary

All right. Well, thanks so much for joining us, everybody. I'm Terence Flynn, Morgan Stanley's U.S. Biopharma Analyst. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm very pleased to be hosting United Therapeutics this afternoon. Joining us from the company, we have Martine Rothblatt, who is the company's Chairperson and CEO; and Pat Poisson, who is EVP, Strategic Development; you both so much for taking time out of your day to join us. Really appreciate it and looking forward to the conversation. Maybe Martine, first, I'll just turn it over to you to maybe make some framing comments before I launch into my questions, but thanks so much.

Sure, Terence. Thank you so much for inviting us here. We appreciate it. It's great to have the opportunity to give some framing comments because this is a very unique point. It's you net down to the -- no other point is like this quarter in United Therapeutics' entire history because this is the quarter that we have gone ahead and inflected ourselves from being an orphan drug pulmonary hypertension company, which was our history developing great medicines, multiple great medicines for pulmonary hypertension and building ourselves up to a few billion dollars a year in recurring revenue. And inflecting ourselves into a pulmonary fibrosis company that will be treating hundreds of thousands of patients with a best-in-class drug for idiopathic pulmonary fibrosis. And we're pretty confident we'll soon show similar results in progressive pulmonary fibrosis, which is not an orphan disease. On top of all of that, due to some new products that we developed such as our costless Tres my inhaler, we'll be launching studies next year into a form of COPD called COPD PH, which can be uniquely treated by our drug and has a prevalence in the United States of 400,000 to 800,000 patients. So it's just amazing, Terence, I know you've been with us for quite a number of years, monitoring the company to be at this point in time when you look behind you and you see, okay, you've gone from nothing to being I guess, the largest player in pulmonary hypertension. Building up this several billion dollars of recurring revenue. And then looking forward and saying, oh my God, we're about to launch into becoming like a major bracket biotech company with something like $50 billion to $100 billion in pharma revenue, mostly in non orphan indications, all based on clinical trial results that have been now submitted to the FDA and in the estimation of all of the experts, whether in PAH for our medicine generally, once daily pill for pulmonary hypertension, or an IPF for our medicine nebulized Tyvaso in everyone's estimation, these are the best drugs in these 2 different diseases with the best clinical trial results that have ever been shown. So it's a hell of a point to be giving you a framing comments right now. SPEAKER01

Great. Appreciate the update. And again, I'm looking back -- we were talking earlier about how far the company has come. I think I've been covering the company for 20 years. But obviously, a lot has changed since those days.

Yes. I pinch myself actually because I remember when we were like 5 people and now 2,000 people with 14 drugs in active development, it's truly amazing.

Great. Well, I think I know the answer to this question already given your framing comments, but I think the official long-term guidance you guys have given is $8 billion in revenue. Now again, as you just think confidence level there, but maybe what are the drivers to get to that $8 billion before we talk about the $50 billion?

Sure. So the $8 billion we see coming from all of our core business where we are continuing to grow in all of our legacy products like Remodulin, aremtram and Tyvaso. And -- but especially in the newly launched projects which include, first of all, nebulized Tyvaso for IPF. We've submitted that to the NDA to the FDA. We've got our PDUFA date. So we're pretty confident of launching that product in the middle of next year. That product will be launched into an indication with 100,000 prevalence in the United States. The only alternative drug that has been shown to give an improvement over some very old, very toxic medicines is a BI drug called CASCADE. And our -- we're really happy to see that medicine launched. But our medicine nebulized Tyvaso showed in 2 separate Phase III well-controlled studies, dramatically greater improvement than [ Jascade. ] And when like you break it down to how many years of life an average patient can expect they would be able to expect multiple years more of life on nebulized Tyvaso than on any other product in the IPF space. So we certainly expect several of those billions of dollars a year to grow in IPF. In the meantime, Terence, we just fully enrolled another study in a much larger indication called PPS and we fully enrolled the study, 700 patients. We'll have data about this time next year. And we feel very confident that our drug will work in that indication as well. So when you look at the combination of 100,000 patients in IPF, 300,000 patients in PPF, that's 400,000 patients, and they'll take you far beyond the $8 billion revenue run to what we expect will be in the fibrotic type conditions like this, a $40 billion pharma revenue. So that's the near term. And then as I mentioned briefly in the framing remarks, I'll just touch on it very quickly. Other products that we are developing for the IPF market, including DPI Tyvaso and cough free, [ Tresmi ] and then once daily [indiscernible] we will be bringing those products in to further solidify our hold on the IPF and PPF markets. So $40 billion is -- it's, of course, a lot of money. But we have a straight shot at it. We have the clinical trial data for the base of it. And I should mention that the company has been able to successfully garner intellectual property protection for its fibrotic applications of its medicines out to the 2040s and composition of matter IP protection for [indiscernible] also into the 2040s.

Great. Maybe we'll unpack a little bit of that on the Tyvaso for IPF front first. Again, maybe just speak to about the confidence in an FDA approval here again, if there's any outstanding issues or questions that FDA has raised at this point. I know it's still early in the review process.

Well, super great question, Terence. But actually, I can say having looked at the FDA's comments leather, I can't remember any leather back to us on a filing from the FDA in the past 20 years with fewer comments. So it's not surprising that it will be a very clean situation. because the FDA has been approving Tyvaso in various indications for quite a few years for like over 10 years. So it's known to be a very safe and effective molecule. Also the device that we're asking the FDA to approve it for in pulmonary fibrosis, the nebulizer device is a device that the FDA has previously approved and has an excellent track record. And last but not least, the pulmonary division of the FDA asked us to do 2 separate trials in stand-alone IPF without any confounding patients from PPS PF. We said definitely, yes, sir, we executed those. And wow, the results were mind-blowing. I'm talking about round numbers, 100 milliliters of oxygen improvement compared to baseline and death like way beyond anything that [ nintenamide, pirfenidone or even Jascade ] ever showed -- so I'm super excited. Everybody at UT is super excited that we are going to be able to literally promise tens of thousands of patients with pulmonary fibrosis, more years of good quality and good quality life. And that's a beautiful thing to do in this industry.

Great. Maybe talk to us about the launch preparation. So you guys have, I know, expanded your Tyvaso sales force. Is it possible that you can leverage some of that existing build? Or do you need another build out here to push further into the community pulmonology setting. So maybe just talk about the prep you're doing on the launch front for a second.

Yes, Terence. That's a fun question because I can answer yes and yes, which is the best. So yes, very definitely, we will be leveraging the new hires. We doubled our ILD sales force and a goodly number of those people in the doubled forest already have a great deal of expertise in IPF. So when they -- when we're ready to launch the product, they now will have familiarity with how to submit expense reports and the UT system and all that kind of normal and customary stuff and we'll be able to flip out flip over to detailing full on straight-up IPF prescribing doctors. In addition to that, to be able to satisfy our 100,000 patient market we're going to be doubling that sales force multiple times. And I expect that at the rate of our product introductions into IPF, in the PP that you'll be hearing from Michael Benkowitz, our Head of Commercialization, our President, that there'll be another doubling of our sales force just focused on IPF each year for the next 2, 3 years.

Okay. So doubling every 2 to 3 years -- and that will cover though the PPF indication as well.

I think that's just for the IPF okay. And then there'll be additional hiring for PPF. PPF is a form of pulmonary fibrosis caused by an array of kind of other conditions and/or causes. And it's 3x larger than the IPF indication. So that takes us up to the 400,000 patients. And I feel pretty confident just thinking a little bit on the fly here up on the stage that to adequately cover the entire 400,000 patients, you would need upwards of a minimum 1,000 person sales force, which are U.K. Fortunately, we've built up all these different sales forces. We're good at that. And we're committed to leave no pulmonary fibrosis patients behind.

Okay. Great. You talked about the patient prevalence numbers already. I guess the other one is just how to think about treatment duration here for Tyvaso and IPF relative to PAH or maybe even current IPF drugs. I know the current drugs struggle some of the tolerability issues, their TKIs have a lot of GI side effects, among other things. So how do you think about the treatment duration here for your product in IPF specifically?

Yes. Thanks, Terence. So we actually kind of pre thought about the therapy duration in these patients. And that's why we've queued up a line of 4 products that can basically address ever-greater arrays of patients. And people are diverse and some people can tolerate a product, even the ones with GI side effects for a longer time, other people can't. So the first product introduced is a nebulized Tyvaso. And then coming on the heels of that, we have the DPI Tyvaso, which is already approved by the FDA in ILD and PH, as you know. And that product is a lot easier because it's a shorter number of inhalations, more rapidly get it accomplished. You can put it in your pocket, more portable. So that will be the next product introduced in the indication. Then to yet further reduce people dropping off therapy will next introduce the [indiscernible] my product, which is a soft mist inhaler, and as the name applies, for those patients who have difficulty tolerating dry powder, which is not most patients, but a significant number. And as I said, we don't want to leave any patients behind. We'll then introduce the soft mist powder inhaler into the market. And I think that will get further keep patients on the drug, reduce the number of dropouts. And then the fourth of these is the once-daily [indiscernible] product with what we believe is the most effective [ treprostinil ] like agent [indiscernible] this indication that you only have to take 1 inhalation once a day beyond the doubt, the easiest 1 of all of them to stay on. Dropouts in our other [indiscernible] studies were very, very low. So between those 4 products, my hope is it could be just de minimis single-digit percent of patients drop off these therapies. And more important than that is keeping the patients alive for much longer than what's ever the case with previous drugs.

Yes.When do you think you would have some survival data? I mean you mentioned keeping patients alive. I know these trials in IPF weren't designed for that. They are lung function endpoints. But as you -- similar with PAH, we saw the field evolve from, again, 6-minute walk distance to now you have longer-term outcomes. So when do you think you could see some of that longer-term outcome data for Tyvaso and IPF?

Well, a lot of that data you can actually get right now just using arithmetic. And Pat, if I might be able to ask you your differences there?

Yes. So if you look at a decline in FVC on a patient who's not being treated, typically, you would see between 200 ml and 250 ml annually. Jascade showed a vast improvement. They're down to say, 100 to 125 ML. So if you kind of think about years, that extends that time period by a year. When you look at Tyvaso, which was down in the 40% to 50% range when compared to someone not on treatment, that's a 5-year change in decline. Contrasted with someone health with a healthy person where you'd see 25 ml. So you're seeing a difference really just a 20 ml from a patient a sick patient with IPF on Tyvaso. -- which is very close. So there's a drastic difference in clinical efficacy, very compelling.

Okay. Great. I guess you mentioned PPF here, and you're going to have some data second half of '27. Maybe just talk to us about why you're confident that the IPF data will translate to PPF? And you guys have a lot of models you use for the IPF in terms of running scenarios and things like that, but where does the confidence level come from? And just is it similar biology, different biology. And then I have a couple of follow-ups.

Sure. So with regard to the PPF, our confidence was first built up from our Phase II equivalent study, which we call the Increase study that we did an patients that had a mixed population of some IPF and some PPF. And we saw the drug was quite effective in those patients with PPF. In fact, based on that study, we went to the FDA and asked them if we could do a single combined study of IPF and PPF. The FDA pushed back and they said, you know this is a new drug and a new indication -- and we want to get this clear read as possible of everything. So notwithstanding the favorable Phase II equivalent data, we want you to do a separate IPF study. In fact, we want to do 2 well-controlled IPF studies which we did, and those are called the T1 and T2 2 studies, and they produce the remarkable results that Pat just described. So then we went back to the FDA, and we said, okay, we've got TTI and TTMI underway. We'd like to do a PPF study. By now, I think the FDA was becoming quite comfortable and familiar with the device, the drug, the indication -- use in the indication -- and they agreed that we could just do a single PPF study of 700 patients. Now while we were enrolling the study, we were being received constant incoming from all the IPF docs saying, you guys got to develop this drug for PPF. And there's nobody that everybody knows their patients better than the physicians treating them. So whether it was in Europe or the U.S., I mean, across the board, IPF docs were saying, please develop this for PPF. So we did that. And Terence's remarkable result was that we had the fastest enrollment of a clinical trial study ever in our 20-year history. Just all the way up to 700. So fully enrolled now, and we'll have the data next year. I might add that the -- an answer to your question that we've also run all manner of in vitro cell activity, cell studies to test the efficacy of the treprostinil molecule against fibrotic tissues, and whether the tissues are sourced from IPF or PPF, you repeatedly see that treprostinil is effective.

Okay. Great. Before we go on to some of the other products, I just want to tell on kind of Tyvaso in market, ILD has been the newer indication in terms of the forward DH was the first indication. I'll use the second. Maybe just give us an update on kind of where you stand as of second quarter and how to think about the outlook for that franchise on market in the second half of this year?

Sure. I think we're going to continue growing in the ILD market, ILD PH market, we are already the most prescribed drug in that market. As you may have heard on our last earnings call, we now have record starts, new patient starts in that market. the availability of both the nebulized Tyvaso as well as the DPI gives you kind of 2 shots on goal. Good in getting back to your question earlier, about patient dropouts when there's different ways for the patient to take the drug and different ways for them to reach different levels of concentration of the drug and it helps you build the patient census up. So I expect us to continue growing in the market. What's changed is the indication itself which once seemed kind of significant at, I don't know, 20,000 or 30,000 patients after we unblinded the TTI, the TTMI results and saw the rapid enrollment in PPF, it's like Oh my God, this is not even 1/10 of the market for United Therapeutics products. This is actually like 120th of it. So the company's focus has very much shifted the pulmonary fibrosis and progressive pulmonary fibrosis because that market is literally 20x as large as the ILD market. our nature as a company is to continue to pay attention to these orphan indications. You may recall Terence, that we continue to serve the ultra-orphan neuroblastoma market with Unituxin, which -- in which we save 500 kids lives every year, year after year from cancer, which would otherwise kill them. So we're dedicated to maintaining our presence in the ILD market. I'm sure we'll remain the #1 seller in the ILD market, but it has become kind of a small thing in the overall landscape of UT.

Okay. Maybe just pivoting over, you mentioned your [indiscernible] softness program already. Maybe just remind us there the target profile and then what's gating to the NDA filing here?

Sure. Maybe a good opportunity pass in charge of product development and teacher product fulfillment. So Pat, if you could talk about.