United Therapeutics Corporation

Good morning and welcome to the United Therapeutics Corporation fourth quarter and full year 2022 earnings webcast. My name is Devin and I will be your conference operator today. All participants on the call portion of this webcast are in a listen only mode until the question and answer session of this call. If you would like to ask a question during this time, press star and then the number one on your telephone keypad. And if you would like to withdraw your question, simply press star and then the number one on your telephone keypad. I will now turn the webcast over to Dewey Stedman, Head of Investor Relations at United Therapeutics.

Thanks, Devin, and good morning. It is my pleasure to welcome you to the United Therapeutics Corporation fourth quarter and full year 2022 earnings webcast. Accompanying me on today's webcast are Dr. Martine Rothblatt, our Chairperson and Chief Executive Officer, Michael Binkowitz, our President and Chief Operating Officer, James Edgeman, our Chief Financial Officer and Treasurer, Pat Poisson, our Executive Vice President of Technical Operations, 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 these forward-looking statements. Today's remarks may also 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 use. Full prescribing information for the products are available on our website. And United Therapeutic Executives will participate in three investor conferences in March. First, Michael Binkowitz will participate in a fireside chat at the Cowan Healthcare Conference on Tuesday, March 7th. Dr. Martine Rothblatt will participate in a fireside chat at the Oppenheimer Healthcare Conference on Monday, March 13th. And our Chief Medical Officer, Gil Golden, will participate in the JPMorgan Napa Valley Biotech Forum on Tuesday, March 21st. Now I'll turn the call over to Dr. Rathlet for an overview of the fourth quarter and full year 2022 financial results and business activities of United Therapeutics. Dr. Rathlet.

Thank you, Dewey, and good morning, everyone. I feel very excited to lead this call because we have so much positive news to report about 2022. In fact, you know, reflecting back on the past few years, this is actually the best year United Therapeutics has ever had. And it augurs even more, I think, positively for what we're going to see coming up in 2023, 2024, and 2025. Let me hit a few highlights. First, 2022 was our highest revenue year. ever. Second, 2022 was our most profitable year ever. Third, 2022 was our highest operational cash flow year ever. And fourth, we ended 2022 with more patients on our troprosomal medicines than ever before. I think you'd have to agree with me that these are fantastic results. And now I'd like to give a few indications of why I think that as great as these results are, they are not laurels for us to rest upon, but instead a launching pad for yet greater results in 2023, 2024, and 2025. In fact, the patient uptake of our new Tyveso DPI medicine has been so rapid, that we can project a doubling of our revenues by 2025. This doubling of revenues is helped by the unique nature of each of our medicines, including Tyveso DPI. For example, Tyveso DPI is the only inhaled troprosinol product that enables deep lung penetration via a high-resistance, low-flow device. Another example, a remodulin product. is the only parenteral prostacyclin delivered by the small, easy, super accurate Remunity device. The differentiated aspects of Remodulin has allowed its revenues to remain steady at about a half a billion dollars a year for the past three years running. Our Arenatram product is also very unique because it is the only titratable oral prostacyclin product. We currently expect its third of a billion dollars a year revenue to continue growing as physicians become aware of the results of our recently released expedite study. That study showed remodulent patients can be switched directly to arenatram. And arenatram will soon be joined by new products from our pipeline. In the field of pulmonary arterial hypertension, we expect to complete our phase three trials of Relenapag by 2025. That will enable the first once-daily dosing of a prostacyclin pill in the pulmonary hypertension field. In the field of pulmonary fibrosis, we expect to complete our phase three trials of Tyveso by 2025 as well. That will, we hope, create the first disease-modifying treatment for pulmonary fibrosis. a true landmark in the field. And in the area of transplantation, we hope to commence clinical trials of manufactured organs within the next few years. That would be a major contribution to ending so many deaths on the organ transplant list, and unfortunately, even more deaths from end-stage organ disease off the transplant list. In summary, our business, our patient count, Our pipeline is growing longer and faster than ever before. 2022 marked the continuation of that growth factor into 2023. We have achieved a very nice balance of growth and strength. We intend to continue building on this platform in the years to come. To provide now some additional very meaty and I think extremely exciting details of how we are continuing to build on this platform, I'd like to introduce our President and Chief Operating Officer, Michael Benkiewicz. Mike?

Thanks, Martine, and good morning, everyone. From a commercial standpoint, as Martine said, 2022 was a phenomenal year for us. We're extremely pleased with the progress of the Tyveso DPI launch, as referrals, starts, and active patients for both Tyveso and Tyveso DPI are among the best that we've seen to date. We were also very excited to achieve our goal of doubling the number of Tyveso patients following the PHILD approval in early 2021. This was a goal that Unitharians across the organization rallied around and supported, so we're really proud and appreciative of everyone's hard work over the last couple years to help us reach this milestone. Importantly, reaching this goal reinforces to us the impact that Tyveso and Tyveso DPI are having not only in helping patients with PHILD, treat this serious progressive disease for which there are no other available options, but also the impact Tyveso DPI will have in PAH. With the simple convenience of a small inhaler that fits in the palm of the patient's hand and an elegant ease of use following the simple mantra of open, load, inhale, we believe Tyveso DPI will meaningfully expand the use of inhaled tryprosinol in both indications. The Tyveso DPI inhaler device developed by our partner, Mankind, is able to efficiently deliver tryprosinol deep into the lung in one breath per cartridge using less active ingredient than the nebulized reference. The convenience and efficacy of our DPI device, coupled with Tyveso's known tolerability profile, has us well-positioned to expand our reach in PHILD and to move the use of tryprosinol therapies like Tyveso, DPI, and PAH even earlier than IP receptor agonists like Celexapag. We're seeing this play out with our prescribers as evidenced by several positive trends. Since the PHILD launch, we've increased the total number of Tyveso prescribers by about 70% and increased by almost 60% the number of prescribers with three or more patients in their practice. This last point is an intro marker we look at to gauge product support. We have found that once a physician has at least three patients on one of our products, they tend to become what we call supporters and start using the product much more frequently and regularly. We're also making headway with traditionally loyal Celexapag prescribers. Of the top 100 Celexapag prescribers, 70% have now written Tybaso DPI, and 50% of those have written five or more prescriptions. From a revenue standpoint, we're very pleased with how the quarter and the year wrapped up for Tybaso, but there are a few key points I want to highlight. The first and most relevant to the fourth quarter of 2022 is that we're still in a launch boat for Tyveso DPI, and even for the PHILD indication, for that matter. As such, our specialty pharmacy distributors are still right-sizing product orders based on estimated underlying patient demand, both in total and between Tyveso nebulized and Tyveso DPI. Therefore, our distributors are placing orders more frequently than their once or twice a month historical cadence. And these new ordering patterns did impact the timing and size of product orders and thus our product revenues during the quarter. Second, we're also building Tyveso DPI inventory as we're launching the product. So our distributors are not yet able to order sufficient product to reach contractual inventory levels per their usual practice. We expect over the next several quarters, these two factors will normalize and our specialty pharmacy distributors will shift back to a more historical type cadence of product orders. For these reasons and the usual historical seasonality to our business that we have discussed on prior calls, we think annual revenue trends are a better lens through which to view and evaluate our business. The last thing I want to touch on with Tyveso is our patient assistance program or PAT. Patient utilization of our program, of our PAT program for Tyveso DPI, which is covered under Medicare Part D and has high patient copays, has been higher than anticipated. including by many PHILD patients who were on the nebulizer and in PAP last year and have since transitioned to DPI. We anticipate that this will be a short-term phenomenon and that many of these patients will be covered under their Medicare Part D plan starting in 2024 and continuing into 2025 once changes to the Part D provisions of the Inflation Reduction Act begin to go into effect. Turning to a renter tram, we see continued momentum for a renter tram as we enter the fourth quarter with the highest number of patients on therapy since its launch. We're also excited about the recent top-line expedite data we press released in October of last year that demonstrated that prostacyclin induction with remodulin can lead to double the average renotrim dose when patients shift to oral therapy compared to patients who do not have a remodulin induction. Following up on this top-line data, we plan to present additional details on expedite at scientific meetings this year along with a peer-reviewed manuscript detailing the study in the second quarter. And finally, we continue to be pleased with the performance of remodulin in the U.S. as the fourth quarter was one of our highest referral quarters ever. The remunity pump for remodulin is gaining momentum with approximately one-third of subcutaneous patients now on remunity, especially as remunity is the only subcube pump widely available for new patients to try proximal therapy. So to wrap up, after reaching our goal of doubling the number of tibiasal patients, We're confident in our ability to double our annual revenue run rate from approximately $2 billion today to $4 billion by the end of 2025. We expect continued Tyveso and Tyveso DPI uptake in both PAH and PHILD to drive most of our near-term revenue growth, supplemented by our rent-a-term growth through the expedite protocol and other research, and supported by continued remodeling resilience. With that, I'll turn the call back over to Martine.

Michael, thank you so much for providing that wealth of detailed information, supporting this great growth sector we have going here from 2022 into 2023, 2024, 2025. Operator, feel free to open up the lines to any questions now.

At this time, I would like to remind everyone, in order to ask a question, press star 1 on your telephone keypad. Our first question comes from Jessica Fye with JP Morgan.

Great. Good morning. Thanks for taking my questions. I have two, if that's okay. First, can you provide some of the assumptions specifically around Tyvesa and Tyvesa DPI that help underpin your target to roughly double your revenue run rate for the overall company by the end of 2025? And then second, just following up on Michael's comments and prepared remarks, I was hoping you could elaborate a little bit more on that comment about the utilization of the PAP program for DPI being higher than anticipated among PHILD patients who transitioned to DPI. Is that to say that because of the higher out-of-pocket in Part D in the short term that they're receiving free drug? And how should we reconcile that with, I think, what was anticipated to be a bit of a tailwind in 2023 from PAP patients transitioning on to reimbursed product this year? Thank you.

Yeah, thank you, Jess. And good morning. Good to hear your voice this morning. Generally, we try to like limited one question per questioner because there's so many people in queue. But because your two questions are, in a sense, kind of like a tag team question, one in a way flows into the next. Mike, I'll kind of ask if you can handle both questions.

Yeah, so I think, Jess, your first question around the underlying assumptions for our confidence in the growth of tidasso in both pH and pH ILD is, in some ways, it's a little bit of a math exercise, but also just, I think, just the excitement and enthusiasm we're seeing around DPI. So if you think about In the PAH, the group one, who group one market, there's about, I mean, roughly 50,000 patients in the U.S. diagnosed with PAH. Still, and shockingly and sadly, it's probably only about, I would say, about 30% to 35% of those patients are on a prostacyclin. And there's a lot of reasons for that, and a lot of it comes down to the fact that the the delivery mechanisms for prostacyclin are, you know, they're not terribly convenient. But I think that is changing when it comes to DPI. So we feel very confident that we will be able to, with the convenience of the DPI inhaler, be able to expand the use of prostacyclins in the PAH market meaningfully. So I think we feel like even though it's a crowded market, even though, you know, Tyvese has been out there. We still think that there's a lot of opportunity within the Who Group One market to grow the use of prostacyclin, and particularly Tyvese. And then a similar story, but maybe a little bit easier on the PHILD side, because there you have a market that's conservatively 30,000 patients with no other approved therapy. And so we've roughly tapped into about 10% of that over the last couple of years, and we think we have the other 90%. um available to us so we still feel like we have a lot of runway there to to grow uh to grow with type a so and again i think just with convenience of dpi it's going to get easier for doctors um to prescribe that drug for for those patients that have phild um and then shifting to your second point on on on the pap so so yes so so the issue is that we had uh patients in um PHILD patients on Medicare in our PAP program for 2021-2022. Expected a lot of those to roll over starting in 2023, and a lot of those have started to roll over in 2023. It's not as high as the number that have rolled over. It's not as high as we expected for a couple of reasons. One is I think at the end of the third quarter, I think we reported that there were about 700-ish patients in the PAP program. So some of those discontinued, which we expected. Some of those, even after becoming eligible, even with the CMS coverage, still qualified for PAP. And so they stayed in PAP. And then, as I said in my prepared remarks, we did have a number of patients that transitioned to DPI between the end of the third quarter and the beginning of the first quarter. And so with the higher co-pays in Part D, they were then eligible to remain in PATH. So I think we still had about half, slightly more than half of those patients convert over. I think they're still kind of working through the system, but it's a little bit less than we were expecting, I think, when we had the call in the third quarter.

Thanks, Mike. Those are great answers. Jeff, one just additional shade of color I could add on top of Mike's remarks with regard to your question as to what kind of parameters can I provide to provide greater assurance about the doubling of revenues by the end of 25. is the uptake of Tyveso DPI has been dramatic. And as Mike mentioned, he provided some metrics. For example, the very high number of CelexaPEG prescribers who had not previously prescribed Tyveso now prescribing Tyveso DPI. So when we achieved the doubling of our patients on Tyveso over a period of just 18 months, I can't really overemphasize what an important metric that is. Just to give you kind of a sense, Tyveso was approved 10 years ago. So it took like 10 years to get up to a certain level of patient penetration for this drug. And then in under two years, it doubles. I mean, it's an unmistakable sign in addition to the steps that Mike shared with you that this product is going to penetrate very, very rapidly. Now, while one might think that in an area such as pH group 3, which has been penetrated by no pulmonary hypertension medicine, like, oh, these are all just like, you know, people dying of thirst and just, you know, going to just slop up this new medicine right away, the reality in a disease like pulmonary hypertension is that it just doesn't happen like that. Instead, it's a very kind of blocking and tackling exercise of physician by physician, center by center, working through all of the rigmaroles of talking to the right payers and getting the payers to understand the right procedures and going through all the procedures and the pre-approval, diagnoses, requirements, the catheterizations, and all of these things. So while we did create like, you know, special teams focused on PH group three before we launched into that indication, in the field of pulmonary hypertension, one year of kind of preparation is sort of like nothing compared to how much activity is needed to build a bulk of patients. So now that one year is more than two years behind us. We've now had a year of actual practice. Okay, you can actually put these patients on medicines. As Mike referred to, the payer aspects, especially with regard to Medicare, were just very, very recently resolved favorably in our direction. And so it's just you have to first have not just one year and not just like there wasn't like a waiting bolus of patients in group three just waiting for a launch. You have to like develop this market and, you know, really kind of, you know, till the soil for a number of years. We've now done that. And we're experienced in those clinics. And it's this reason why we think out of those 30,000 PHQ-3 patients, virtually none of whom have been touched by pulmonary hypertension treatment, that we can rapidly grow our numbers of patients at the same rate that we've been growing them for the past year with this doubling of the number of patients on Tyveso and thereby reach a number of total troposomal patients, something that would be in the 20,000s that would correlate when you multiply that times the reimbursement per patient to the $4 billion per year. And of course, it's important, in addition to this, not to be losing revenue from remodulin or arenatram, but not only are we not losing revenue, we're solidifying our hold on the remodulin revenues, as Mike referred to the very rapid penetration that the remunity pump has made, and we're growing our revenues in arenatram as a result of the expedite study that Mike described. So we feel that doubling revenues in three years is really a very doable do. Thanks, Jess. Operator, next question, please.

Our next question comes from Terrence Flynn with Morgan Stanley.

Hi, good morning. This is Justin Phillips on for Terrence. Just one question for me. Was wondering if you could provide any details today on the type of trends for January and February? Thank you.

Sure. Mike, would you like to take that?

Sure. I'm not going to get into too much detail in terms of previewing the quarter. I mean, I think what I can tell you is, and really I've got, you know, about a month of data behind us, but I can tell you that the, you know, the trends in terms of referrals, that's what we call prescriptions for Tyraso in January are, you know, very strong, at record level for January. And at least what I'm seeing through, there's a lag on a February data, but February is continuing that. So again, I think we're really pleased, just to echo what Martine said, I think we're really pleased with the uptake of Tedieso generally and specifically with DPI.

Thank you, Mike. That's so nice to hear. You know, record January referrals after a record year. Fantastic. Next question, please.

Our next question comes from Hartaj Singh with Oppenheimer and Company.

Great. Thank you, and good morning, everyone. Hey, just a quick question on a slightly different topic. You know, with your plan to potentially double revenues by 2025, you've still got the Tyveso IPF-based retrial reading out around then. which is positive, you know, my team sent another nice little, you know, runway there. Could you maybe just go over, remind us again if Gil is on the call and, you know, the data behind that, your certainty around that project, and then just some basic sizing of the market. Thank you.

Sure, Dr. Singh. So happy to hear your voice this morning. And thank you for asking a science question. We love those questions best of all. We have on our call Dr. Lee Peterson, and she is our chief scientist for the program, and she's also running the Teton clinical trials. People often wonder why they are named Teton, and it's because Dr. Peterson is from Wyoming, so it makes perfect sense. And Lee, if you could provide Hartaj with some of the scientific information reasons why we feel very confident that the phase three trials of Tyveso and IPF are rightly sized and that the endpoints are rightly chosen.

Yeah, sure. Thank you for the question. As you know from the results of our increase study, we had an exploratory endpoint, which was forced vital capacity. And that was really, for the PHILD population, it was really a safety assessment in the study, but it turned out we actually saw an improvement of that endpoint in patients on Tyveso, relative to placebo. And so between the results of this study increase in PHILD patients, as well as quite a bit of evidence in the literature of in vitro and non-clinical studies that Tyveso or Ciproxenil does have an impact on fibrosis, it's very reasonable that we would be able to have a positive impact in an IPF population. And so using the, you know, the statistics and the treatment effect that we saw in increase in specifically IPS patients, we were able to do sample size calculations in order to predict that we would have a successful study with, you know, with a sufficient p-value to get approval. We're actually doing two studies, one, T-Con 1 study in the U.S. and Canada, as well as T-Con 2, which is outside of the U.S. and Canada, in order to, and each of those studies are about 400 patients, almost 400 patients. And enrollment is going well, as expected. And as Martine said, we expect a readout in around the 2025 timeframe of both of those studies. They They both have an FBC endpoint, again, same as what we saw, a positive effect in increase, and we have a year-long follow-up period. We've also had some published results of the increase. You might remember that the randomized part of the study in increase was 16 weeks, but we continued to follow patients, those patients in a long-term open-label extension study. And so we've been collecting long-term FVC data as well, which looks promising and also gives us confidence that the TITAN studies will be successful, but to be determined in 2025 timeframe.

Well, thank you so much, Lee. And I just want to toot your horn just for a moment to the hundreds of people on the call that there was similar skepticism as to whether or not Tyveso could work in in group three patients, and you proved that it could. And I believe your results were published in the New England Journal of Medicine, so congratulations again. Next caller, please. Thank you.

They were.

Our next question comes from Ash Verma with UBS.

Hi, good morning. Thank you for taking my question. I have one. So for Tyway, so was there any inventory buildup in 3Q that binded down mostly in 4Q? Or do you think inventory is still at an elevated level during 4Q? I think you mentioned that specialty distributors are still prioritizing the orders.

Thank you, Ash. Thank you for that question. Fortunately, we have our chief financial officer on the phone, James Edgemont, And James, if you could perhaps help Ash with the inventory question.

Yep. Thank you, Martin. Good morning, Ash. Thank you for your question. I think there's kind of two ways to answer. One is Michael addressed and talked about the Tyveso and Tyveso DPI ordering patterns in his prepared remarks. And I think if you look at B as part of the answer, the other products, There was no unusual ordering or inventory activity, and our specialty pharmaceutical distributors were in line with their contractual requirements on inventory. So hopefully that provides you insight in terms of your question this morning. So thank you, and back to you, Martin.

Thank you, James. Operator, next question, please.

Our next question comes from Joseph Tome with Cowan & Company.

Hi there. Good morning, and thank you for taking my question. We're going to be seeing the full Merck SataraSep Phase 3 data at ACC in about 11 days. And I was just curious how you see a potential future SataraSep launch impacting the PAH market broadly, and maybe how this is reflected in that 2025 revenue runway guidance that you announced. Thank you.

Yeah, thanks for the question. So it's really like super speculative to provide any kind of a meaningful answer to the question because we don't know, you know, what the regulatory timeframe is going to be for Sotatercept. So it's all but impossible to give you any kind of accurate sense. I will say that our revenue forecast is agnostic with regard to whether or not Cetatricept is approved or not. In other words, we will remain confident about achieving the doubling of our revenues by 2025 without regard to its launch. It's a very large and diversely treated patient population. Changes in treatment patterns are relatively slow and cautious, especially other than frontline treatments such as like ETRAs or PD-5s. So I'd be very, very skeptical that you would see an impact of cetatriceps. on United Therapeutics revenue profile or product uptakes across the board, whether it's Remodulin, Tyveso, Tyveso DPI, or Arenatram. More broadly, the experience has been that when new agents have been introduced into the market, it has grown the market for all of the existing patients. It's kind of like a market growth thing. You saw this with, for example, back in the day when we launched Remodulin and J&J's precursor, Actilion, launched Bosantin, the the troposynol revenues did not shrink. In fact, they grew. And then later on, when PD-5s were introduced, the market for ETRAs and troposynol did not shrink. In fact, it grew. It grew quite a bit. And this has been just a continuous process, and it harkens back to the landmark number that you should keep in your mind that Michael Bankowitz mentioned in his remarks was 50,000, five zero thousand. That's the number of patients diagnosed with pulmonary hypertension. And all of these drugs have just like scratched the surface of being able to really treat the patients and get them back to a New York Heart Association functional class one or even functional class two level. So there is so much robust room for growth and improvement in pulmonary hypertension. We at United Therapeutics welcome any new agent that can help the health of the pulmonary hypertension patient population. And by the way, all that is with respect to WHO Group 1 pulmonary hypertension. So everything I just said. Then you've got this other huge pool that Dr. Peterson opened up with her New England Journal article, WHO Group 3, 30,305. thousand patients, of which the only approved treatment right now is our Tyveso drug. And I think Sotatercept, I would love to see another good drug to help people with pulmonary hypertension. I don't think it's going to have any effect on our revenue growth. Next question, operator, and we'll have to cut it after that due to coming to the end of time.

Our final question comes from Andreas Argridas with Wedbush Securities.

Good morning. Thanks for taking our questions, and congrats on a great year. Just a quick one here on Tyveso DPI. Are you still seeing more rapid uptake in new patients versus transition, and what is the split between new and transition patients? Thanks.

Oh, very good question. Thank you for the congratulations. Mike, can you give us our final answer on the call?

Sure. Yeah, so I think it's probably – I have to go back and look. I haven't looked at it in a couple weeks, but I think it's still weighted towards new patients in terms of DPI. I mean, the transitions are coming. It's just as I think I said on the last call, I think what physicians are doing is they're waiting until patients come in for their regular checkup. So, you know, they're kind of coming – they are coming in at a healthy clip, healthier than what we were seeing. And I think that will continue through the course of the year. And so I fully expect that by the end of the year, those patients that want to transition to DPI will transition to DPI. So it's certainly kind of a point of emphasis for our sales team. And certainly, as I said, certainly I think the physicians are aware of it. And as those patients come in and they decide that the patient's eligible to transition, they'll move them over.

Thank you, Mike. Thank you. Well, to wrap up the call, we are tremendously excited about 2022. This is the year that we hit our $2 billion revenue run rate that has been our goal for really much of the past several years. And we are even more jazzed and more pumped by the fact that the $2 billion level is makes it very clear to us that $4 billion is achievable with all of the products that we are currently marketing and explaining to physicians the scientific and medical benefits of. And then beyond that, as Hartaj indicated in his question, we have a whole other slew of products coming out of our phase three pipelines particularly a whole new disease indication, pulmonary fibrosis, and then on top of that, a best-in-class treatment for pulmonary hypertension, which would be Relenopeg. So 2022 was amazing. Huge kudos to everybody on the team for achieving it. 2023 is looking even better. And with that, operator, you can close out the call.

Thank you for participating in today's United Therapeutics Corporation earnings webcast. A web broadcast of this webcast will be available for one week by visiting the events and presentations section of the United Therapeutic Investor Relations website at ir.unither.com. Have a good day.