United Therapeutics Corp

NASDAQ:UTHR

Earnings Call Transcript 2019-Q3

[Operator]

Good morning and welcome to the United Therapeutics Corporation Third Quarter 2019 Earnings Call. My name is Justin 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. [Operator Instructions]. I will now turn the call over to James Edgemond, Chief Financial Officer of United Therapeutics. Sir, you may begin.

[James C. Edgemond, CFO & Treasurer]

Thank you, Justin, and good morning everyone. It is my pleasure to welcome you to the United Therapeutics Corporation third quarter 2019 earnings call. Accompanying me on today’s call are Dr. Martine Rothblatt, our Chairman and Chief Executive Officer; and Mr. Michael Benkowitz, our President and Chief Operating Officer.

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 Form 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 non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release available on our website at www.unither.com.

Today’s remarks may discuss the progress and results of clinical trials and 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 usage. Full prescribing information for these products is available on our website.

Now, I will turn the call over to Dr. Rothblatt for an overview of our third quarter 2019 financial results and business activities of United Therapeutics.

[Dr. Martine A. Rothblatt, Chairman and CEO]

Thank you, James. Good morning everybody. As James mentioned I'm pleased to be joined today by our President and Chief Operating Officer, Mike Benkowitz and he and James and I will answer questions after I give a brief business overview of the United Therapeutics as of the third quarter 2019. We're pleased with our financial results over the past quarter and they're available in the press release but on every metric we're very pleased with how everything came out.

Let me give a bit of an overview now on some of the exciting business progress going on at United Therapeutics. Last month my colleague Dr. Petersen reported the FDA approval of our new label for Orenitram. This was really a signal accomplishment for United Therapeutics. It's something that we worked on steadfastly for just about a decade. And for those of you who are kind of pulmonary hypertension geeks or really into the deep history on the drugs used to treat pulmonary hypertension it's interesting that even though the active pharmaceutical ingredient in Orenitram treprostinil was discovered by the Nobel Laureate Sir John Vane, he himself did not believe that this API would be able to be successfully developed as an oral treatment that could reduce the rate of progression of pulmonary hypertension much less reduce outright morbidity or mortality. And he was a great guy unfortunately he passed but it was thanks to him that we developed our perennial form of treprostinil which the brand name is Remodulin. And he was spot on correct that that would be a highly effective treatment for patients with pulmonary hypertension.

But it's kind of a little bit of like a pinch me moment when you have a Nobel Laureate thinking that this is just not going to be able to work as a pill and you slug away for 10 years and during the course of that 10 years you're always thinking geez maybe Sir John was right, maybe Sir John was right, and then you end up with this absolutely beautifully executed FREEDOM-EV study with the excellent results that we shared with everybody last year and we're still crossing our fingers up until we get the final FDA stamp of approval on the results which occurred just earlier this month. So that was really I think beyond the results -- beyond a doubt not only the signal results since our last earnings call but also of 2019. I really personally believe that due to the great label that the FDA approved on Orenitram that over the next two to three years we're going to be able to double the number of patients that we have on Orenitram and then actually be able to double that again in the following two to three years after that. So it's a really good outlook for Orenitram thanks to this accomplishment of our new greatly expanded label for that product.

Now there's some other really good things that are coming up in the approval category during the next 12 months. And frankly we have never had a greater perspective news flow for United Therapeutics than we do in the next 12 months. In the next 12 months we hope for and expect there to be no fewer than three new approvals for United Therapeutics out of the FDA. First one that we have also been working on for just about 10 years the ISR, implantable system for Remodulin. We hope to get the final approvals for that as those of you who have been following us for a while know. Actually it's United Therapeutics already got its approvals from the FDA and we're waiting for the final Medtronic approval before we could commercially launch that project.

Second up we expect to get the FDA approvals needed for the commercial launch of RemUnity also for those of you who have been following us we actually did get an initial 510k approval on RemUnity and we're just waiting for a final approval on a kind of a special 510k or regulatory analogs of that that we would expect in the next 12 months. That would be truly transformative for the patients on subcutaneous Remodulin. And then third we expect that within the next 12 months to have an FDA approval for Trevyent that's the product that we acquired along with the acquisition of SteadyMed. This one is going to be transformative for a very large segment of the pulmonary hypertension population especially that segment that suffers from connective tissue disease. And there's a whole spectrum of connective tissue disease states such as scleroderma and Raynaud's disease and all of these kind of conditions they make it very difficult for patients to activate the tiny button that we have on all of our devices.

So I think that that one being so simple, no buttons involved for the patients to have to adjust the dosage or anything like that truly just a plug and play system, I believe that Trevyent together with the RemUnity is going to allow us to significantly expand the reach of subcutaneous Remodulin patients well beyond the number of patients that we have already been able to help and serve with that product. Speaking of number of patients that we are helping and serving, I hope my colleague Mike won't be angry at me for stealing his thunder a little bit but we are now serving more patients with treprostinil than we have ever served in the history of the company. So it's a -- it's really a great launching point for 2020 because here we are serving more patients than we've ever served before and we're on the cusp of launching in the next 12 months not to mention the true launch of Orenitram with the new label so really four new products each of which have an ability to significantly expand the number of patients that can be served by the treprostinil family of products here at UT.

So on the FDA approval front I think you know things could not be going better but let's take a look at what's going to come next after these approvals. So we have also found ourselves in a very good position because of all the spadework and seed planting that we've done over the past few years to harvest two unblinding in the next coming quarter. By that I mean the first quarter of 2020. We expect to unblind first of all our distinct study of Unituxin or Dinutuximab for our small cell lung cancer. That's really exciting because right now we've been able to serve roughly speaking about a thousand patients with Unituxin. Those are the patients suffering from neuroblastoma. But the small cell lung cancer patient population is in the tens of thousands. It's really an order of magnitude more than we're able to serve within neuroblastoma. So we're really, really hoping for a positive unblinding of Unituxin/Dinutuximab in the first quarter and then that would set us on a course of FDA filings and then launch within a year after that to a 10 fold larger population than we're able to serve with neuroblastoma.

And then in another very similar story but different disease state we will be unblinding our increased study and this is of Tyvaso in Group 3 pulmonary hypertension. This is a group of patients characterized by interstitial lung disease and pulmonary fibrosis, a group of patients that payers will not approve the use of Tyvaso in this patient population today because they have very different characteristics. They are for example not cardiac catheterized which is definitely a checkmark that payers require before reimbursement for the drugs in the Group 1 idiopathic or secondary pulmonary hypertension population.

So this population is also 10 times larger than the number of patients that we are able to serve with Tyvaso today. So it's a very analogous parallel situation with the cancer situation where we have got a great drug Tyvaso, a great drug Unituxin, able to serve single digit thousands of patients, doing very well with those and now we'll be able to unblind in the next quarter basically the same drugs. So very much reduced risk in terms of the regulatory process. But for a patient population that's ten times larger than the one that we're already serving. So again very, very sweet situation with those two unblindings in the first quarter.

Let me just wrap up with kind of a flyover of the deeper pipeline just because we've got so much exciting stuff going on in the current 12 month pipeline. But there is upcoming a I&D filing to begin the formal clinical development of our once daily formulation of Orenitram. There will be a movement right through the I&D or just there about for RemoPro that will be the much less painful or painless form of Remodulin, again a certainly a game changer in subcutaneous treprostinil because of its ability to greatly mitigate and for some patients eliminate the citing. The very exciting TreT program which we've done in combination with Mannkind where we were able to reduce the burden associated with Tyvaso to something that is truly deminimus fits right in like a clutch purse or just a little even jean pocket and really liberate thousands and thousands of patients from one of the burdens of dealing with drug delivery systems for pulmonary hypertension. That program is going very well also being managed by Dr. Petersen and patients are already being dosed.

The perfect trial of Tyvaso in COPD, this is a trial that we're very grateful to Dr. Waxman leading the way with his early proof of concept of the excellent results of Tyvaso in the very large and oftentimes difficult to treat COPD population. So that program is being run by our Lung Biotechnology unit and also proceeding straight forward with patients already being enrolled. Again just to be clear that's also a Phase 3 trial. Our humanized form of Dinutuximab, we're not resting on any laurels with the good results of Unituxin and thanks to a great partnership we entered into with St. Jude Medical we've been able to in license the rights and now begin manufacturing a humanized form of Dinutuximab. This might be delving a little bit into the ubergeekiness but I am personally very proud of the kind of a manufacturing feat myself. There was like multiple fold improvements in the efficiency of our production of that humanized monoclonal. So hats off to our totally awesome biologics and manufacturing group.

And last but not least some very, very exciting progress on the XENO kidney front. We will open up in the next quarter the company's first designated pathogen free facility with XENO kidney. The acronym for that is called a d-delta, p-papa, f-foxtrot, DPF and what that means is that the kidney is being produced in a pig in that facility in a way that the FDA agrees the organs from that pig can be put into a person. The FDA does not allow you and thank goodness for that just to take you know any farmer John pigs organs and put them into a person. They're very, very strict that you have to have a completely sterile environment just as you would have for any other drug or biologics that you are putting inside a person. So a XENO kidney is just a giant biologic. And there are very strict rules in terms of every aspect of infection testing and C-sectioning of the genetically modified pigs for those organs to end up being tested in man. So that facility will come online in 2020 and then paves the way for us to be able to actually get FDA approval, accomplish the first man of our XENO grafts in the 2021-2022 timeframe.

So I probably got a little bit over my allotted time here. I got ahead by five minutes but in any event I'm so excited about all the stuff going on in UT. So operator if you can please open up the phone lines and I will post the questions to Mike and James.

[Operator]

Thank you sir. [Operator Instructions]. Our first question is going to come from Jessica Fye from JP Morgan. Your line is now open.

[Jessica Fye, JP Morgan]

Hey there, good morning. Thanks for taking my question. I was hoping you could elaborate on the earlier pump comments. I guess specifically can you help me understand the timing and order in which you expect those three different pumps to launch?

[Dr. Martine A. Rothblatt, Chairman and CEO]

Yeah, thanks Jessica. You know everything is up to the FDA so it's really difficult to be precise about that. You can be the Trevyent is one that I think you can follow from the PDUFA timeline of the FDA. RemUnity the FDA filing is actually not done by United Therapeutics, it's done by Decca who is our pump partner, and the ISRs I mentioned in my opening remarks it's also it's a Medtronic product. So I wouldn't want to really fine tune it so much as to like line them up as one, two, three or two, three, one. But we do feel quite confident that all three will launch in the next 12 months. Next question operator.

[Operator]

Thank you our next question is from Martin Auster from Credit Suisse. Your line is now open.

[Martin Auster, Credit Suisse]

Thanks for taking the question. Thanks for taking the question. On Remodulin Martine I'm curious in the early days of generics if you're seeing any sources of pressure all specific to kind of either Medicaid or Medicare or in commercial if there's relatively any one area where you're seeing more pressure more vulnerability for the franchise? And also the ex U.S. Remodulin sales, I noticed those were up pretty sharply from 2018 to 2019 year-to-date, just curious if there was any color you guys could provide around that? Thanks for taking the question.

[Dr. Martine A. Rothblatt, Chairman and CEO]

Sure Martin, nice to hear your voice this morning. I'm going to sort those questions the first one to Mike as he has overall authority, both questions to Mike. So I'm going to sort both questions to Mike as he has got overall authority on all commercialization…

[Michael I. Benkowitz, President and COO]

Yeah, thanks Martine. So Marty when I went two full quarters out facing current competition and really have not seen a material impact to Remodulin business. For the second quarter in a row we achieved a record number of Remodulin patients on therapy. I think I mentioned in Q2 that we saw the highest number of new patient starts in almost 10 years and Q3 we didn't quite get that number. We came with it but just came a few prescriptions short. So we're really pleased with how things have evolved in the face of generic competition. We really have not seen any peer pressure of note. I mean there's -- there are one off payers I think that with what they call dual Medicare Medicaid patients where we're seeing a little bit of pressure but it is such a small part of the business that it is really not material in the grand scheme of things. And beyond that there's really just, at this point no pressure, no payer pressure of note. So it's definitely I think where things sit with respect to your first question.

Second question on the international business, we have similar to the U.S. we actually have seen nice uptick in demand, patient demand, prescriber demand for Remodulin outside the U.S. The other thing that's happened I think is the change in our relationship with Ferrer that happened over the last 12 to 18 months or so. So they've taken on more responsibility for labeling and packaging of our product. As a result of that their orders are up because it takes them more time to get through that process. In the past we were doing the labeling and the packaging and sending it to them and so yeah, their orders are up relative to what they've been in the past just because they need more time for the labeling and packaging process.

[Dr. Martine A. Rothblatt, Chairman and CEO]

Great, thanks Mike. Thank you so much. Operator next question please.

[Operator]

Our next question comes from Liana Moussatos from Wedbush Securities. Your line is now open.

[Liana Moussatos, Wedbush Securities]

Thank you for taking my question. What would be clinically meaningful for overall survival in DISTINCT for the six minute walk in increase and in increase why did you use six minute walk distance for primary endpoint instead of morbidity mortality?

[Dr. Martine A. Rothblatt, Chairman and CEO]

Yeah, thank you Liana, nice to hear your voice this morning. With regard to DISTINCT I'm actually not really qualified to answer that question. It's the -- oncology programs run by Dr. Golden who's is not on the conference call this morning. So I'm going to punt on the detailed answer to that question other than to say it is a survival end point study. So we are currently within a handful of patients from having a hard day at the survival end point and then being able to unblind and see the difference between the non-Dinutuximab treated and the Dinutuximab treated group. All of those patients have of course had their conventional therapy treatment for their cancers but beyond just mere survival I'm just not up to speed on the next level of details below that.

With regard to the six minute walk end point for increase, the reason for that is I would say twofold. First of all, 6 minute walk has long been the gold standard for measurement of whether or not somebody has obtained an improvement in their clinical status for pulmonary hypertension. For those of us who are around pulmonary hypertension patients a lot you hear all the time that their inability to do simple matters of exercise is the bellwether sign of a other decline in their health status whether it's like not being able to walk around Wal-Mart or not being able to walk even to the mailbox and then not being able to walk up the stairs. So six minute walk is definitely a good FDA multiple time endpoint for pulmonary hypertension.

Secondly because there are no other treatments available for the patients with interstitial lung disease and pulmonary fibrosis there was no need to have a mortality or morbidity or combined mortality morbidity endpoint as there is in Group 1 pulmonary hypertension where there's upwards of a dozen different approved therapies. And one wants to have the high mark in terms of -- the highest possible mark in terms of your data which is what we were able to achieve with FREEDOM-EV. So it's kind of -- it's really two completely different markets. There's -- we've done a lot of research on this, there's very, very few patients in the Group 3 who are treated with any of the drugs approved for Group 1 for the reasons that I said before, it's just not something that has been proven to work. In fact it's something if you're treating the patients in Group 3 with a systemic drug like a perennial drug or oral drug it's actually contra indicated in most people's points of view due to the occurrence of perfusion ventilation mismatch.

So it's something that can only be treated with inhaled drug and now you come down to just two inhaled drugs iloprost and Tyvaso and as good as United Therapeutics is at helping patients get reimbursement for their drugs, the payers say this drug has not been approved for Group 3 and they are not going to pay for it. So unfortunately many, many patients in this category today have foreshortened lives and foreshortened qualities of life due to the absence of any drug at all approved for the treatment of their condition. So as the first one it's no real sense to like leap further than you have to go and jump higher than you have to go. Getting Tyvaso approved for this population will be huge. And as I mentioned would be a tenfold increase in our addressable market population for Tyvaso. So we want to do that as quickly as possible with as lowest risk as possible and a six minute walk distance is both kind of the most logical way to achieve that. Thanks Liana. Operator next question.

[Operator]

Our next question comes from Hartaj Singh from Oppenheimer and Company. Your line is now open.

[Hartaj Singh, Oppenheimer & Company]

Great, thank you everyone. Thanks for the question. Martine, I just want to ask you a little bit about Orenitram. I know it's on the commercial side so you and Mike you had indicated that now via the label expansion you'll be able to get 2X to 3X more patients. Can you just talk a little bit about what kind of patients would be more of the new patients, would be able to get from the prevalent patients although maybe some patients that might not have qualified before that can get on Orenitram would really appreciate it? And by the way congratulations on not having that generics apocalypse that supposedly was going to happen. Thank you.

[Dr. Martine A. Rothblatt, Chairman and CEO]

Thank you so much Hartaj. Great hearing your voice this morning. Yeah, we feel the love on that one so thank you so much. I'm going to bounce the Orenitram growth trajectory question over to Mike.

[Michael I. Benkowitz, President and COO]

Yeah, thanks Hartaj. So I think -- Martine I think made in his opening comments that this is really sort of the first true launch. This is a really a true launch of Orenitram and I think that's accurate and that's certainly how we are thinking about it. If I think about the challenges that we've had in the marketplace with Orenitram prior to the EV label it's -- I think the number one challenge is doctors were really trying to figure out where -- what's the right patient to use Orenitram. And I think the nice thing about the EV study is that answering that question definitively. If those early stage patients that's your functional Class 2 patients that are starting to be symptomatic and where you're going to have time to start them on a low dose, titrate them up slowly, help them manage their side effects, and get to a therapeutic dose in a sort of a four to six month timeframe. And then at that point they sort of crossed the side effects hurdle so to speak. I'm starting to see the benefit of the drug and the doctors can titrate up accordingly based on how the disease is progressing.

So I think in terms of the patient type that's really I think the sort of the number one thing that we've been able to answer with respect to the EV study and then part and parcel of that as I mentioned is, the other issue has always been sort of tolerability than side effect. And so I think by starting the right patient, giving them time to titrate up we're really solving two problems with the drug. And so I think because of that we now have doctors understanding that okay, now I understand where to use the drug, now I understand how to use the drug. It'll take a little bit of time because you've got doctors that have historically believed in the drug and this really confirms their belief in the drug and how they're using it and hopefully we'll see them put more patients on therapy.

Doctors that had maybe a poor experience with Orenitram in the past we know are taking a look. I mean I was at CHEST last week and talking to several doctors that have said either they have already taken another look at Orenitram based on the EV data or certainly are planning to. So I think generally they're impressed with the data and is bringing those doctors back to take a second look at the drug. I think the other place that we're going to use -- we're going to see this use and we have seen this use are patients that have been on Remodulin for some period of time have started to stabilize and actually improve in functional class and the patients want to get off the pump. And so we have data from several years ago that talks about how patients can successfully transition from Remodulin to Orenitram and they've done a lot over the long term. And we're looking at some other ways -- other studies that would further reinforce that.

And so for patients that maybe aren't in that Functional Class cat -- Functional Class 2 category or maybe more Functional Class 3 and they're sort of tweeners between a KD start them on Orenitram, do you start them on Remodulin and maybe Tyvaso is not the right answer for them. You could potentially start them on Orenitram say for -- I'm sorry, start them on Remodulin for 30 to 60 days, get them up to a dose and then quickly switch them over Orenitram. So again I think what the EV label is it really just kind of opens up -- really opens up the range of possibilities for where to use the drug. But I think to your original question the main -- I think the main question and answer is what that early stage patients look like that's the ideal candidate for Orenitram.

[Dr. Martine A. Rothblatt, Chairman and CEO]

Mike, thanks. That is such a great explanation. Thank you for letting all of that out. So to wrap up here we're very excited to have now crossed 7500 patients. Once you cross this has been a goal for our company for quite a while and I really want to salute Mike and the entire commercialization, compliance, medical affairs, teams that have been absolutely essential to accomplishing that goal. And I think it is now as I hope everybody can see from the explanations given during the call very much reasonable within our sites to next walk on to the goal of 10,000 patients on treprostinil. And this can be done, one is Mike explained with the growth objectives for Orenitram thanks to the EV label. Secondly, as I mentioned in the introductory remarks, with a three new look transformative to proximal prudential delivery systems, ISR, RemUnity, and Trevyent. And then finally with the current BREEZE trial that we have going on with TreT and the Mannkind product. You combine that with hopefully a successful unblinding increase and opening up a very small, easy to act, easy to use drug deliver device with a ten fold larger population and it seems to me that 10,000 patients on treprostinil is a very readily achievable, reasonable growth for our company to set out for ourselves and we have done that. So thanks so much for joining us this morning and we look forward to seeing many of you certainly at the JP Morgan in just a couple of months to come. Operator you can wrap up the call.

[Operator]

Thank you. Thank you for participating in today's United Therapeutics Corporation Conference Call. A rebroadcast will be available for replay for one week by dialing 1-855-859-2056 with international callers dialing in at 1-404-537-3406 using the access code 7462119. Thank you.