United Therapeutics Corporation

Good morning and welcome to the United Therapeutics Corporation first quarter 2021 earnings call. My name is Phyllis and I will be your conference operator today. All participants will be in a listen-only mode until the question and answer portion of this earnings call. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press pound on your telephone keypad. I will now turn the conference call over to Mr. Dewey Steadman, Head of Investor Relations at United Therapeutics.

Good morning. It's my pleasure to welcome you to the United Therapeutics Corporation first quarter 2021 earnings call. Accompanying me on today's call are Dr. Martine Rothcott, our Chairperson and Chief Executive Officer, Mr. Michael Binkowitz, our President and Chief Operating Officer, Mr. James Edgeman, our Chief Financial Officer and Treasurer, and Dr. Lee Peterson, our Senior Vice President of Product Development. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause actual results to differ materially. Our latest SEC filings, including Forms 10-K and 10-Q, contain additional information on these risks and uncertainties. We assume no obligation to update forward-looking statements. Today's remarks may also include financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found on our earnings release available on our website at www.unithair.com. Today's remarks may discuss the progress and results of clinical trials or other developments with respect to our products. These remarks are intended solely to educate investors and are not intended to serve as the basis for medical decision-making or to suggest that any products are safe and effective for any unapproved or investigational uses. Full prescribing information for the products are available on our website. Now I'll turn the call over to Dr. Rothschild for an overview of our first quarter 2021 financial results and business activities of United Therapeutics. Dr. Rothschild.

Thank you, Dewey. Good morning, everybody. Thanks for joining us on our first quarter 2021 earnings call. I'm going to start off with a sort of 30,000 foot overview. And then after that, I'll open the line for any questions. If there are business questions, I'll refer them to our president, Michael Mankiewicz. If there are financial questions, I'll refer them to our chief financial officer, James Edgeman. And any scientific questions, I'll refer to our senior vice president, Dr. Lee Peterson. I may even pass the odd legal question to Dewey. Well, I think from a 30,000-foot viewpoint, the main quantitative goal at United Therapeutics is what we call 25 by 25. This means increasing the number of patients that we are helping with our main medicine from over 8,000 patients today to over 25,000 patients by 2025. This quantitative metric is an especially important one to call out today because today is World Pulmonary Hypertension Day. It's the one day in the whole calendar that countries throughout the world have agreed to focus their thoughts and tension and for many patients and families prayers on the hopes for getting better therapies and treatments for people with pulmonary hypertension. We expect about half of the roughly 18,000 patient growth that we will require to meet our 25 by 25 goal. will come from patients with what's called WHO or World Health Organization Group 1 pulmonary arterial hypertension. And about half of that 18,000 patient growth will come from patients with World Health Organization or WHO Group 3 pulmonary hypertension. Let me start by breaking down how I believe we'll get our 9,000 patient growth in the Group 1 category. Then I'll talk briefly about the second 9,000-station growth in the Group 3 category. So for the half of the growth we expect in WHO Group 1, we expect that to come in roughly equal thirds from our remodulin products, our Tyveso products, and our arenatran products. We think we'll be able to gain about 3,000 new patients on remodulin, particularly due to the convenience and patient-friendliness of our newly approved remunity pump. We think we'll be able to gain about 3,000 new Group 1 patients on Tyveso because of the convenience and patient-friendliness of our new Green Boat dry powder inhaler, which we have filed for approval and we hope to be approved in December of this year. This is a finger-sized device compared to the large liquid nebulizer that we use today. And then finally, we think we'll be able to gain about 3,000 new patients between now and 2025 on arenatrams. because of the constantly growing appreciation of the efficacy of Eremitram in reducing morbidity and mortality. Now, please keep in mind that far about in the U.S. alone, 45,000 patients in WHO Group 1 being treated with non-United Therapeutics drugs, and about 15% suppressed in their disease annually, per the Kaplan-Meier curve of their trials. So overall, there are some 50,000-plus patients being treated for pulmonary hypertension, about 8,000 of them currently being treated by our drugs, and the balance, somewhere between 40,000 and 45,000, probably closer to 45,000 being treated with non-united therapeutics drugs. So it is very... There is plenty of market space. There's plenty of health location space available for us to grow in WHO Group 1 from the current 8,000 patients we're treating to something like 16,000 patients that we expect to help by 2025. Now, I mentioned that our total goal is to help 25,000 patients with pulmonary hypertension by the year 2025. And the second half of that, achieving that 25 by 25 goal, comes from penetration of WHO Group 3 by Tyveso for our FDA approval that we received just last month. Now within WHO Group 3, There are something between 30 and 40,000 patients with pulmonary hypertension. We are told actually by prescribers that the actual number is quite a bit larger than even 40,000. It's somewhat similar to the situation with WHO Group 1. You'll see various accounts that there are 40,000 patients, 50,000 patients. We are told by prescribers that actually there are quite a much larger number of patients with WHO Group 1 pulmonary hypertension. And it is a difficult disease to really quantify and identify because it's a disease that is identified by excluding numerous other conditions whose symptoms mimic those of Group 1 pulmonary hypertension. Anyway, back to the Group 3 pulmonary hypertension, there, whether the number is 30,000, 40,000, or larger, we are the only drug now approved for this IPF market segment of IPF patients with pulmonary hypertension. And this portion of patients, also called ILD-PH patients, are actually the ones who have the most rapid declines. In other words, if you have interstitial lung disease and you have pulmonary hypertension, the statistics show that your decline to death is much more rapid than the patients with interstitial lung disease that do not have pulmonary hypertension. So given that there are well over 30,000 patients who need treatment and that our goal by 2025 is to capture at least 9,000 of those patients, I think it's a very achievable goal in terms of comparison to the captureable market size. So in addition to this 25 by 25 goal that we are hard at work at and is our number one quantitative priority, Let me also mention a few of what I would kind of call three options in our pipeline. And by three options, I mean we are doing these things. I believe they have a very high probability of success because they are in either late stage clinical trials, phase three clinical trials, where statistically the odds of success are quite high. Or they are... that we would call biocomparable therapeutics, meaning that they are comparable to things that are already approved by the FDA. So let's talk about some of these quote-unquote free options in our pipeline. First of all, there's a Phase III study of Tyveso in COPD-associated pulmonary hypertension. The name of this phase three trial was called our PERFECT study, and it should complete its enrollment by the end of next year. Second, we have a phase three trial of a drug called RELENOPET in group one pulmonary hypertension. This study is also doing very well, and I think it should probably complete its enrollment also by the end of next year. In fact, it's just under one-third enrolled at this point in time in the lead of the Winnipeg trials called the Outcomes, Advanced Outcomes Trial. Next up, we have yet another Phase III trial, this one of Tyveso in interstitial, I'm sorry, in idiopathic pulmonary fibrosis, IPF, that should be completed in its enrollments Oh, I would say in the first half of 23. This is very interesting for United Therapeutics because it is actually the first time that we have developed non-oncologic treatment outside of around having anything to do with pulmonary hypertension and yet using drugs, Tyveso, which has just been approved in an adjacent therapeutic class to the target of this trial. So let me unpack that for a moment. The approval that we just had in an adjacent therapeutic class is the approval the FDA granted us just this month. based on our increased trial, which was in patients with pulmonary fibrosis as well as pulmonary hypertension. So they had kind of a double strike, and that's what I mean by an adjacent therapeutic class to pulmonary fibrosis without pulmonary hypertension. And in that adjacent therapeutic class, we were able to show improvements in the key therapeutic clinical markers of pulmonary fibrosis. That key indication is called forced ventilator capacity, or just for short, FVC. And we were able to show improvement in that. That was shown and talked about also in our New England Journal of Medicine publication on the trial. And so now we're approved in the adjacent class. So we are now taking that same drug that's proven safe and effective in IPF with pulmonary hypertension and developing it in IPF without pulmonary hypertension. So again, I think the odds are very strong in our success, and it's a well-designed study. By the way, we call that study the TETON study. It's the head of our clinical and product development program for the pulmonary fibrosis activities. Dr. Lee Peterson hails from the Grand Teton State of Wyoming. Third, we have another phase three study, a pivotal study, registration study of our ENOS gene therapy treatment for pulmonary hypertension. And this one should also complete its enrollment by the end of next year. And then last, but not least at all, in fact, in many ways, close to first, is our biocomparable once-daily form of arenatram and our biocomparable less-painful form of remodulin, both of which should be launched by this key quantitative date of 2025. So to wrap up from this high-level overview, we've got an awful lot in the market. It's a market which is a very capturable bias and much larger than the number of patients who are currently helping, plus a lot of new products to bring to the market. So I think if I was a parent of a patient with pulmonary hypertension, as I am, and there are tens of thousands others, hundreds of thousands of others throughout the world, On this World PAH Day, I would be very thankful and very hopeful about a bright and optimistic future. With that sort of introductory remarks, operator, if you could be so kind to open the lines, and I'll be happy to field the questions.

At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from the line of Yun Yang with Jefferies.

Thank you. I have a couple of questions. One is on group three, PHILD. So we heard from physicians that they see their patients every three to six months, and I know Martin just mentioned that group 3 is a more difficult disease to diagnose and quantify compared to PAH. But aside from targeting physicians, do you plan to target patients so that patients are actually seeking treatment with Tyveso? And the second question is on subcutaneous remodeling. I understand that you may be limited to what you can say, but in PENQ, the trial with Sandoz and Liquidia, you don't expect to begin before mid-2022 at the earliest. Does that mean that Liquidia cannot launch the product until the trial is over? Thank you.

Thank you for your questions, Yoon. Nice to hear your voice this morning. Due to the shortage of time on the call, we're only going to be able to allow one question per inquisitor, if I can say that. So I'm going to just take the first question and refer it to Michael because it's really in the domain of a business question. Mike, can you help Yoon with understanding what our strategy is with regard to ILDCH?

Sure. Good morning, everybody. So let me, before I get to the specific question around the patient, maybe give a little bit of color around the PHILD launch. So, you know, Martina, I think, gave a great overview of sort of our five-year vision of growing from roughly 8,000 total patients to 25,000 patients and roughly half of those being tibiasal patients for various indications. So with respect to the PHILD piece of that, I just want to reiterate what we've been saying since January, and that with this launch, we expect the number of patients on Tyveso to approximately double by the end of next year. And the other thing that we've been saying is that it's probably not going to be a straight line from here to that doubling. There will be a little bit of a ramp, and then something that looks a little bit more hockey-stickish as we get later into the year and certainly into next year. That's due to various factors. things around the fact that, and you touched on this, we have a new group of ILD treaters, so they're having to go through the process of getting their patients in, screen those patients, diagnose those patients, and then get that cleared with payers. So that process is ongoing. I will say in the first three to four weeks of the launch, it's very early days, we're incredibly pleased with what we've seen in terms of referral activity. in terms of the number of referrals that have come in. We actually have patients that have started since the launch on Tidaso. And I'll also say that in the last week, I've been out meeting with six of the major IOD centers in the western half of the U.S. And I will say to a person, to a center, all of those physicians are extremely excited about having a treatment option for Tidaso. for these very sick patients. And again, all have said that there is a meaningful unmet need here that we're going to be able to address with Tyveso. So we have been since last summer building relationships with these new treaters, educating them on the disease. Now we're able to talk more openly about Tyveso, the benefits of Tyveso, how you get a patient started now that we have the approval. And then the second prong to that, coming back around to Ian's question, is yes, of course we are, we have multiple patient engagement and education efforts ongoing. Obviously, you know, with FDA guidelines and other restrictions on being able to communicate with patients, we have to be a little bit more careful in those in those engagements for very good reasons, but we do have a, I would say, a very robust patient engagement and education effort ongoing.

Awesome, Mike. Thanks so much. Operator, next question.

Your next question comes from the line of Liana Musados with Wedbush Securities.

Thank you for taking my question, and congratulations on all the progress. How are you going to commercialize Tyveso solution versus Tyveso DPI at the end of the year, presuming approval?

Thanks so much, Leanna. So great to hear your voice again as well. So that's, again, squarely a business question. So, Mike, can you help describe the differential launch plan?

Sure. So we're really excited about the prospect of being able to bring a DPI to market. We think that it certainly provides a more convenient, easier way to deliver Tyveso. But if you kind of step back and really kind of look at the history of United Therapeutics and what our objective admissions have been or have been, and that is to provide patient options, patients with options, different ways to take our medicine in a way that is you know, meets kind of where they are in their disease, and that's most convenient to them. So we started with Remodulin, and then, you know, we developed, you know, two versions of Remodulin. We developed Kibeso, which was, you know, an easier way to take troposomal inhaled, and then eventually got to Alenotron, which is, you know, obviously the simplest version. of all of them. And so I look at DPI as really kind of fitting in, it's fitting kind of into that strategy of providing patient options. And so I would expect that with the DPI, you're going to have a significant number, majority of patients that are going to want to transition to the dry powder inhaler, and that's fantastic. You will have other patients that, for various reasons, may choose to stay on the nebulizer, and that's great. We're going to continue to support that product. It's a great product. I do think that there is going to be a patient type that is maybe better suited for that product over the DPI. Don't hold me to this. I think when the dust settles, you're probably looking at something around a 70-30 split between dry powder and nebulizer. So we're going to continue to provide both options, support both options, and I think they're both great delivery devices for the right patient.

Perfect. Thanks so much, Mike. Operator, next question, please.

Your next question comes from the line of Hartaj Singh with Oppenheimer and Company.

Great. Thank you for the question. And again, great work. I've got a question on Ornatran. So, you know, since the approval of the FreedomEV, the addition to the label, the study, FreedomEV study, Martine, it has, you know, the trajectory, growth trajectory of the product has definitely increased, you know, substantially in the last two years. Johnson & Johnson was probably the only Italian drug you know, indicates about 20% on average growth, you know, every quarter, some of that from market share, some of that from an increase of viewable market size. Can you give us color there and also, you know, help walk us through how you see Ornithram adding those additional, you know, 3,000 patients, as you had mentioned earlier in your prepared commentary? Thank you for the question.

Great, Hartaj. So awesome to hear your voice this morning as well. Very interesting question. Very much in the range of what we call, you know, business and market strategy. So, Mike, if I can ask you to provide Hartaj with some more insight into the business ramp plans for Renitron.

Yeah, happy to do that. Yeah, so... You know, I think with a renter term, I think you'd have to kind of, you know, again, kind of step back and look at the timing of the launch and kind of where that kind of fit with COVID, right? So I will say, you know, at a high level, I think as a company, we continue to be very pleased with the physician reaction to the EV data. I think our underlying patient trends continue to be very solid, and I would say in particular, I think, you know, in late Q1 and even heading into Q2, if you look at referrals and scars, we've seen actually a nice, you know, nice uptick over the prior months. I will say, in hindsight, 2020, as I kind of look back over the last 18 months and think about when we received the label expansion, which was October of 2019, when the publication came out, which was in March, like literally two days, I think, before the world shut down. To your point, Hart College, we did see a nice uptick in that kind of initial four- to six-month period, and then it did get sort of muted. So we had a nice ramp, and then it just kind of, plateaued a little bit there for a little while. And I think, honestly, I look at it, I think it's a function of, you know, this kind of COVID shutting down, the lack of access that we had to physicians and, you know, just impacting our ability to really kind of get out and continue to communicate the UD data. I mean, we certainly had some access during COVID virtually. but nowhere near the access that we had pre-COVID. So I think as we're starting to come out of this a little bit, we're getting that access again. We're able to get in and have really, I think, fruitful discussions with physicians and really kind of talk about the relative value proposition. I think the doctors are seeing that. And like I said, I think we're starting to see that uptick. And so I think as we you know, look into the future. I think long-term, as Martine said, I think we do have a long runway there with arenatram as we continue to educate the physicians on the value proposition. I also think with, you know, some of the data that we've talked about in prior calls around this idea of treating patients to pressure. So, you know, starting them on remodulin, really trying to drive down their pulmonary arterial pressure and then switching them over to arenatram. I think that is continuing to get a little bit of, you know, certainly a lot of attention by physicians. And I think over the long term, that's going to give us, I think, another, you know, sort of another leverage point with a renter tram. And then I think the third one that we see, you know, in sort of the latter half of the 25 by 25 plan that our team laid out is a renter program once daily. So that provides, you know, as we were talking about today, so a more convenient way to take care and potentially with a better, you know, tolerability and ability to dose faster, so maybe some additional attributes there. So I think it's really sort of a combination of building on and restarting, you know, building on the momentum we've seen in the last quarter and continuing to leverage the ED data, leverage this treat the pressure idea that's getting some attention, and then the once daily formulation that's coming in the, you know, kind of the back end of the 25 by 25 timeframe.

Excellent, Mike. Thank you so much. Operator, I believe we have time for one last question.

Your next question comes from the line of Joe Thone with Cowan & Company.

Another Cowan. Good morning, and thank you. Good morning, and thank you for taking my question. Just a quick one on the TTOM program. As you start thinking about adding more trials here and expanding Tyvaso's opportunity, is it possible to study the DPI alone in some of these trials? Maybe the increased adherence or ease of use would maybe drive better treatment outcomes, or do you have to start with the nebulized version and maybe do a PK study to show equivalence there?

Yeah, since that is, I would say, you know, about as close to a scientific question as we got so far this morning, I'd like to bounce that one over to Dr. Peterson to discuss.

Yeah, fine. Thank you for the call or the question. Um, so we we have been told for actually, we have in writing that once we receive approval for Tyveso for the new indications and once we receive approval for the Tyveso DPI for PAH, really, then the approval will be automatically be granted for the additional indications for DPI as they come along. So given that, It really depends on what we decide at the time with regard to, you know, supply, ease of use, where patients are with wanting to, you know, be on a DPI versus the inhaler, the Tyvesial inhaler. We don't exactly know. I mean, we have studied... the DPI, the Tyveso DPI, for human factors in all different indications, whether it's PAH or PHILD or even some ILDs, you know, without diagnosed PH. So as far as that goes, they're quite similar. But there is some... you know, question, and I can't say one way or the other, that some patients with different indications might actually prefer a nebulized form. It might be a little bit easier for them to take and get a good dose versus the dry powder inhaler because they have to, you know, have more, they actually breathe in for the dry powder inhaler. versus the nebulizer is a little bit more passive. So we're going to, as soon as we continue to do additional studies, we'll investigate that. But right now, Teton1 is already in the works. The sites are open and we have a protocol. We should have the enrollment any day now. And that's with Tyveso.

Thanks so much, Dr. Peterson. Really appreciate it. Well, we really have been happy to have an opportunity to share our business, scientific, and financial progress with everybody during this first quarter earnings call. We've been happy to share with everybody on this World Pulmonary Hypertension Day that by the end of next year, we expect to be able to double the number of patients that we have on Tyveso. And by 2025, we expect to be able to help roughly three times as many patients with our trococinal suite of products that we're currently helping today. It is a fact that based on the Kaplan-Meier curves of all of the main approved therapies, that about 15 to 20% of the patients progress in their disease symptoms, signs and symptoms each year. And just to make the math easy, at 50,000 patients, 15% a year progressing is $7,500 a year. 20% progressing is $10,000 a year. So whether the number of patients needing a new therapy is $1,500 a year or $10,000 a year, Both of those numbers are well above the growth that United Therapeutics requires to go from 8,000 patients that we're helping today to 25,000 patients that we'll be helping by 2025. So I believe that the goal is realistic, the need is real, and our capabilities are strong, impressive, and ever-growing. Thank you so much, everybody, for joining us on this call. We look forward to seeing you at least virtually at an upcoming healthcare conference. Operator, you can wrap it up.

Thank you for participating in today's United Therapeutics Corporation conference call. A rebroadcast will be available for replay for one week by dialing 1-800-585-8367. With international callers, dialing 1-416- 621-4642 and using access code 3044748.