United Therapeutics Corp

NASDAQ:UTHR

Earnings Call Analysis

United Therapeutics Achieves Record Revenue and Strong Growth Indicators

United Therapeutics reported an impressive $749 million in revenue for Q3 2024, a 23% increase year-over-year. Key products like Tyvaso and Orenitram showed solid growth, with Tyvaso’s revenue at $434 million, a 33% increase, driven by expanded usage and pricing adjustments. The company anticipates sustaining a double-digit growth rate, aiming for a $4 billion revenue run rate by 2025. Additionally, the share repurchase program successfully reduced outstanding shares by 7%. With a robust balance sheet and continued investment in innovative therapies, United Therapeutics is well-positioned for future growth.

A Record-Breaking Quarter

United Therapeutics Corporation has reported an impressive third-quarter performance, achieving record revenues of $749 million, reflecting a 23% growth compared to the same period in the previous year. This performance marks the company reaching a $3 billion annual revenue run rate, just eight quarters after surpassing the $2 billion mark. This consistent upward trajectory showcases the company's strong market position and the effectiveness of its commercial strategies.

Strong Performance in Key Products

The company’s primary product, Tyvaso, generated $434 million in revenue during the third quarter, which is a notable 33% year-over-year increase. This growth was propelled by heightened uptake, utilization among pulmonary hypertension-interstitial lung disease (PH-ILD) patients, and strategic price increases. Tyvaso has now solidified its position as the leading prescribed prostacyclin treatment in the U.S. across both nebulizer and dry powder inhaler (DPI) delivery systems. The strength in Tyvaso's sales can be attributed to an expanded prescriber base, which has grown nearly 15% since the beginning of the year, indicating robust growth potential in the therapeutic area.

Orenitram's Continued Growth

Orenitram also demonstrated strong performance with revenue reaching $113 million, reflecting a 23% increase from the previous year. This robust demand is linked to enhanced commercial utilization and strategic pricing adjustments. Additionally, the new expedite induction protocol has shown promise, allowing pulmonary arterial hypertension (PAH) patients to transition smoothly from Remodulin to Orenitram, potentially increasing average dosages over time.

Persistence of Remodulin's Market Position

Despite the launch of generics, Remodulin's U.S. revenue saw a slight decline of 2% in the third quarter, amounting to $128 million, primarily due to international order timing. However, the U.S. sales for the first nine months of the year have risen by 12%, showing the brand's resilience against competition. The continuity in demand underscores Remodulin's position as the most prescribed parental prostacyclin in the U.S., with the demand for both intravenous and subcutaneous administration remaining strong.

Strategic Capital Deployment

United Therapeutics has been proactive in managing its capital allocation, evidenced by the completion of a $1 billion accelerated share repurchase (ASR) program during the third quarter. Approximately 3.5 million shares were repurchased, representing around 7% of outstanding shares. Despite this substantial buyback, the company has maintained healthy liquidity in its stock, with trading volume reaching record levels. This responsive approach to capital management illustrates the company's commitment to ensuring sustainable growth and shareholder value.

Guidance for Future Growth

Looking ahead, United Therapeutics is optimistic about achieving continued double-digit annual revenue growth across its product portfolio. The company aims to reach a $4 billion revenue run rate by 2025, driven by its robust pipeline and strategic commercial efforts. The executives expressed confidence in their ability to grow substantially and suggested that as competitors enter the market, existing contracts with payers will provide a defensive moat to protect market share and revenue.

Innovative Developments

The company is also advancing on groundbreaking initiatives, such as the xenotransplantation project designed for organ alternatives. Recent feedback from the FDA has paved the way for continued progress in this area, which could potentially revolutionize transplant medicine and broaden the company's therapeutic scope.

Final Thoughts

United Therapeutics is not just maintaining the status quo; it is looking towards an innovative future with a strong commitment to its current product lineup and new ventures. Its ability to adapt to competitive pressures while continuing to expand and innovate positions it well within the biotechnology sector, rendering it an attractive prospect for investors seeking sustainable growth.

Earnings Call Transcript 2024-Q3

[Operator]

[Audio Gap]

Strategy, specifically regarding our accelerated share repurchase program, or ASR, that was announced in late March 2024 earlier this year. As you recall, we entered into an ASR agreement with Citi to repurchase $1 billion of UTHR common stock. During the third quarter, Citi successfully completed the overall ASR program. having repurchased a total of approximately 3.5 million shares at an average repurchase price of approximately $282 which repurchased shares we are currently holding as treasury stock on our balance sheet. The approximately 2.5 million repurchased shares represent approximately 7% of our outstanding shares as of the program initiation date. Despite this overall reduction in UT's outstanding share count, liquidity in our stock has increased as reflected by our average daily trading volume being at its highest level ever through the end of September. Since the program's announcement in late March 2024, our stock appreciated 47% through September 30. The completion of this ASR program demonstrates our commitment over the last 12 months to all of our capital allocation priorities. First, through our innovative clinical development pipeline, as well as CapEx to support our DPI manufacturing facility in North Carolina and our clinical scale Xeno transplantation DPF facilities in Virginia and Minnesota.

Second, through the acquisition of IVivA and MiroMatrix, as well as an in-licensing agreement to support our small molecule business; and finally, through successful completion of this ASR. Looking ahead, we remain committed to all 3 capital allocation priorities, which in order are, first, to invest in our commercial and R&D opportunities through P&L spend as well as capital outlays for our commercial and clinical facilities. Our second priority is to pursue intelligent business and corporate development opportunities that enhance our rare disease focus and complement our organ alternative initiatives like bolt-on M&A and in-license opportunities. And our third priority to return capital to shareholders like share repurchases. And we'll continue to consider all 3 priorities when deploying our financial capital.

Our healthy balance sheet and robust cash flow generation driven by our growing commercial portfolio, enable us to continue to pursue these capital allocation priorities in a thoughtful manner. Moreover, we remain in a strong position to meet our mid- and long-term goals that set ourselves up for future growth across our innovative pipeline with Tyvaso in pulmonary fibrosis and [indiscernible] in pulmonary hypertension and our revolutionary organ alternative program. On a separate note, in the third quarter, we recorded under selling, general and administrative expenses, a litigation accrual of [indiscernible] million in connection with a potential judgment in the Sandoz case. While this liability could be adjusted up or down in the future as the litigation progresses, it should not be considered a recurring expense.

I'll now turn the call over to our President, Michael Benkowitz, who will give an overview of our commercial performance. Michael?

[Michael Benkowitz, executive]

Thank you, James, and good morning, everyone. Today, we are excited and pleased to report another quarter of record-breaking revenue, achieving a remarkable $749 million, which represents a 23% growth from the third quarter of 2023. Achieving this $3 billion revenue run rate, just 8 quarters after surpassing the $2 billion run rate mark is a significant milestone for our company, something we have been really focused on hitting since the beginning of the year. Before I provide the usual product performance overview, I want to express my thanks and congratulations to my fellow Unitarians for their incredible effort and success. Total Tyvaso revenue for the third quarter was $434 million, marking a 33% increase over the previous year. This growth was driven by continued uptake of Tyvaso DPI, growth in utilization by PH-ILD patients, an increase in pricing and enhanced commercial utilization following the implementation of the Part D redesign provisions under the inflation Reduction Act.

Tyvaso has solidified its position as the #1 prescribed prostacyclin treatment in the U.S. across both nebulizer and dry powder inhaler delivery systems. Referral and start patterns remain very robust and the franchise saw record commercial and total patients, reinforcing our confidence in the durability of our growth profile. We're also seeing the benefit of the sales force expansion and realignment that went into effect at the beginning of this year. Through the third quarter, we have grown our prescriber base by almost 15%, while still maintaining prescribing depth, measured as those physicians with 3 or more Tyvaso patients. 40% of these new prescribers are ILD physicians which is important to grow the PH-ILD market and eventually the IPF and PPF markets if our clinical trials in those indications are successful.

We also reported record revenue for Orenitram at $113 million for the third quarter, representing a 23% growth from the same period last year. This increase was driven by increased demand, higher commercial utilization and pricing adjustments. As with Tyvaso, referral and start patterns remained strong, and we ended the quarter with a record number of commercial and total patients. We are seeing increased utilization of the expedite induction protocol where PAH patients initiate treprostinil therapy on Remodulin and then transition to Orenitram. Over time, we could see the average Orenitram dose per patient increase as patients are able to reach a therapeutic dose more quickly with this approach. Worldwide revenue for Remodulin was $128 million, a slight decline of 2% from last year due to international order timing. However, U.S. revenue grew by 3% year-over-year, setting a new record for total U.S. patients on therapy. And for the first 9 months of the year, U.S. Remodulin revenue was up about 12% from the same period in 2023 reflecting the continued strength of the brand despite competition on multiple fronts.

Looking deeper, U.S. Remodulin referral and start patterns remain very strong. Remodulin remains the most prescribed parental prostacyclin in the U.S. with sustained demand for both intravenous and subcutaneous administration. And this comes 5 years after the first launch of a generic version of Remodulin. Finally, Unituxin also achieved record revenue of $61 million for the third quarter, up 19% from the prior year quarter. U.S. revenue for Unituxin was $58 million, driven by both price and volume increases. This growth demonstrates the product's strong market presence and the effectiveness of our commercial strategies. To wrap up, we are extremely proud of our achievements this quarter driven by strong performance from each of our commercial products. We are well positioned to continue providing these important medicines to our patients and delivering value to our shareholders.

Martine, I'll turn things back to you to run the Q&A. Martine, do we still have you?

[Operator]

We have lost connection with Martine.

[Dewey Steadman, executive]

Yes, I'll run the Q&A. Operator, can we have our first question, please?

[Operator]

[Operator Instructions]

Our first question comes from Joseph Thome with TD Cowen.

[Joseph Thome, analyst]

Congrats on the progress. Maybe a little bit of a follow-up to the expedite question. We have heard since in [indiscernible] launch that some patients are able to deescalate from Remodulin down to oral Orenitram. I guess, is this something that you were seeing, obviously, Orenitram was strong in the quarter. And patients that do kind of titrate off of Remodulin onto the Orenitram, are you going to higher doses like what we were seeing in expedite. And maybe how would you expect this to impact the revenue line maybe going forward?

[Michael Benkowitz, executive]

Yes, I'll go ahead and take that one. Yes. So I think a key parts of that question, Joe. Thanks for the question. I think on the first part in terms of the -- I guess, the down titration offer of Remodulin to Orenitram, I wouldn't say this is a trend yet or I guess, a widely used practice. I mean, we have heard at the margins that there -- some patients are able to do that. But I think the jury is still out on whether that's going to become like a widespread trend. I would kind of point back to kind of how -- to Remodulin performance during the quarter, which is certainly showing that brand is continuing to grow, and there's certainly still a place for Remodulin and parental prostacyclin therapy in PAH.

Regarding expedite in the transition from Remodulin to Orenitram, and the short answer to that is, yes, we do expect higher doses with Orenitram as a result of the expedite protocol. We're seeing, I'd say, higher average dose, right? Because the idea is that you started paying on Remodulin, you titrate them up to a range of a dose and then you're able to transition them over to Orenitram and you're able to get them up to a therapeutic dose in some cases as soon as a month, but I would say, in kind of a 1 to 2 range, which would normally take, if you're starting de novo, it could take up to 6 months. And then from there, depending on the patients to how the patient is doing, and you can continue to titrate up. So as a result of that, we see more patients coming to Orenitram from Remodulin, we're going to see that average dose for Orenitram to continue to tick up over time.

[Martine Rothblatt, executive]

Thank you, Michael. Great answer. Next question please.

[Operator]

And the next question comes from Roanna Ruiz with Leerink Partners.

[Roanna Clarissa Ruiz, analyst]

So I noticed that the nebulized Tyvaso had pretty robust growth in the quarter along with DPI. I was just curious if you could elaborate on some of the drivers behind that? Did that include some new patient starts? And was there a piece of that where if you're observing, are there more patients transitioning from nebulizer to DPI eventually?

[Martine Rothblatt, executive]

Thanks, Roanna. Michael, you definitely have the most knowledge of us on that. So if you could answer.

[Michael Benkowitz, executive]

Sure. Well, I think some of the growth -- some of the year-over-year growth in the nebulized Tyvaso as a function of some of the destocking that we saw last year. And so that may be explained some of the delta. But I would say generally, from a trending standpoint, I think we've reached kind of a really nice kind of steady state in terms of the mix of DPI and nebulizer. It's roughly 2/3, 1/3 in favor of DPI. And we're starting to see really both of those growing. I would say, transitions back and forth between the products, nebulizer to DPI or DPI to nebulizer, it's pretty marginal at this point. I mean, we are seeing some of that, but not a lot. I mean, I think we saw -- when we launched in the DPI, we did see, obviously, a significant number of nebulization transition over to DPI. But that's largely played out. So it's really, I think, more case by case, how is the patient doing on one delivery system versus the other. And then the nice thing about our portfolio is the doctors can toggle back and forth as they need to, depending on how the patient is doing.

[Martine Rothblatt, executive]

Perfect. Thank you so much Michael. Operator next question.

[Operator]

And the next question comes from Andreas Argyrides with Oppenheimer.

[Andreas Argyrides, analyst]

Congrats on another solid quarter. We have some couple of capital allocation questions, just 1 or 2 parts here. But can you talk about Tyvaso and Tyvaso DPI manufacturing capacity to support IPF? Will additional investment need to take place? And then a [indiscernible] share repurchase program. How are you thinking about potential to run another program, especially given the lead up into the IPF?

[Martine Rothblatt, executive]

Okay. Thanks for those questions. And by the way, thanks to Oppenheimer as well for continuing a rare disease day, but we'll be very proud to present at. Our whole community appreciates that. Those 2 questions are best addressed by James. So James, can you take it from here?

[James Edgemond, executive]

Yes. Thanks, Martine. So Andreas, good to hear your voice this morning. On your first question, which I think was capital allocation, but really related to production of DPI relative to an approval in IPF. And we do not expect to have -- or let me say it differently, we expect to be able to support and approval of ICF with DPI. So our production facility in North Carolina, which we talked about previously, a $500 million investment in a new manufacturing facility for Tyvaso DPI and the thinking of expanding that manufacturing capacity was not only to continue serving the existing patient population but be in a strong position to support new indications that would use DPI going forward. So we don't expect any -- we expect to be able to support that. I don't expect any shortages or anything like that going forward at all.

The second question with respect to the share repurchase. As I mentioned in my opening remarks, we did do the $1 billion ASR in 2024, which was completed in September. And as I also mentioned, over the last 12 months, we've actually demonstrated our commitment to all 3 capital allocation priorities through various opportunities. And going forward, we're going to continue to thoughtfully evaluate the deployment of capital in all our capital allocation priorities going forward. So investing in ourselves, in our facilities through a thoughtful corporate development, but also through potentially ASRs. But again, at this point, we're not calling specifically out in ASR going forward, but it's going to be in our catalyst going forward as we look at all our capital deployment. So Martine, back to you.

[Martine Rothblatt, executive]

Okay. Thank you, James. That's -- I love how you covered all 360 degrees of that question, excellent. Operator, next question.

[Operator]

And the next question comes from Roger Song with Jefferies.

[Jiale Song, analyst]

Great. Congrats for the quarter. Maybe a question relates to the margin. And since your sales is reaching a pretty good kind of steady state with a slight growth just curious about the nuance between IV versus subcu against the generic? And then should we see some regrowth from here?

[Martine Rothblatt, executive]

Okay, Roger. Thank you for your question and the complement on the [indiscernible] order Yes, and thank you also for recognizing the growth in the Remodulin patients. I think Mike would have all of the answers as his finger tips to the questions you asked. Mike?

[Michael Benkowitz, executive]

Yes. Thanks, Martine. Thanks for the question, Roger. So with respect to our modular, I mean -- I think we have ever since we were on the cusp of a generic launch, been very confident about the durability and resilience of the brand through generic competition and then even through the introduction of other medicines in PAH. I think if you talk to doctors today, they still think that, that is one of the go-to drugs, one of the best drugs that we have at our disposal to treat pulmonary hypertension patients.

I think the limitation of it being more widely used is one is patients are a little bit reluctant to go on a pump before they have to. And there are other options available. So naturally, we're going to want to try and experiment or use these less invasive options before moving to a module. But PAH is a progressive disease. There is no cure. And so we believe that really almost all patients at some point are going to need parental [indiscernible]. So that's really why, over time, we've been very, I think, confident in the durability of the Remodulin product. And we continue to feel that, that will be the case going forward. And so as we look out into the future, we continue to believe that it will continue to perform at current levels. As we talked about with I think Joe's question, I mean, there could be some toggling back and forth between Remodulin and Orenitram, starting on Remodulin, going to Orenitram, moving up to Orenitram. But even those patients at some point may need to go on Remodulin. So you may see some variability there over the next few years as the expedite approach continues to take hold.

We have another trial that is about to complete called the ARTISAN study where it's similar to expedite and that we're starting a patient on Remodulin. We're actually keeping them on for a longer period of time and the idea is that we're able to return the hemodynamics to a normal level. and then transition those patients over to Orenitram as a maintenance drug. So we continue to feel very strongly that there will be a place for Remodulin in the PHM momentarium now and in the future.

[Martine Rothblatt, executive]

Excellent, Mike. I'd love when you use the word armamentarium. That describes -- Yes. Well, it's like hits UT [indiscernible] perfect. Operator, next question.

[Operator]

And the next question comes from Jessica Fye with JPMorgan.

[Jessica Fye, analyst]

Congrats on what sounds like some favorable pre-IND feedback for the 10 gene edit kidney. Can you elaborate on some of that pre-IND feedback you got from FDA? And maybe talk about how we should think about the design and goals for initial clinical trial.

[Martine Rothblatt, executive]

Sure, Jessica, and it's so nice to hear your voice this morning as well. We have on our call, Dr. Leigh Peterson. She is in charge of all Xenotransplantation. So Leigh, could you address Jessica's question.

[Leigh Peterson, executive]

Yes, sure. Thanks for the question. You're right. We did receive some pre-IND feedback from the FDA on our U-kidney, which is the tangent porcine Xeno kidney, and we're working very hard to submit that IND shortly. We did propose the clinical study design. We had a few proposals there. But unfortunately, we haven't -- I mean, we really don't want to share all of the details until it's officially cleared by FDA, which is IND clearance. So we're really looking forward to sharing that design with you later, but we need to get that IND cleared first.

[Martine Rothblatt, executive]

Thank you so much Leigh. Great answer. Operator, next question please.

[Operator]

And the next question comes from Ash Verma with UBS.

[Ashwani Verma, analyst]

Just good to see you get to the $3 billion annualized revenue run rate. I know you had previously outlined this goal of reaching $4 billion run rate in 2025. Are you still on track to get there? And then secondly, in the last quarter, you made a mention a potential rebating contracting I know the competitor launch has since then been pushed out to May next year, but have you already rebated some book of your business preemptively?

[Martine Rothblatt, executive]

Okay. So maybe best would be to have Mike talk about the competitor environment. And with regard to the revenue run rate, it is actually quite amazing that we have doubled from $1.5 billion to $3 billion revenue run rate so rapidly. As we've mentioned throughout the call and in the earnings release. And actually, as we've been forecasting for the past several quarters, we feel very comfortable continuing our double-digit annual revenue growth based on all of the products that we have in our portfolio and already approved and then in the pipeline and then with the 3 waves that we talk about.

So if you just do the math, you take a $3 billion revenue run rate and you keep growing it at a double-digit rate very quickly, you will be able to get to a $4 billion or $5 billion, $6 billion and beyond revenue run rates, and that's what we're targeting. Mike, can you talk about the competitor environment question?

[Michael Benkowitz, executive]

Sure. And I think your question was specifically around some of the payer contracts we've entered into or in the process of that area. So we did have some started. This is mainly on the Part D side where we haven't with the Part D payers where we historically have not contracted. So we had a couple that went effective July 1. We have a couple, I think, that kick in October 1. And then I think one that kicks in January 1. So by January 1, they will all be in place. So we did see a little bit higher gross to net, particularly on DPI in Q3. But as you can see, we're clearly able to kind of grow through that. We think entering into these contracts now positions us very favorably for when a competitor comes to our kit because we will, at that point, have rebate dollars already flowing through the payers, and we have parity and nondisadvantaged language. So I think they're going to be reluctant to just turn those off overnight. And so we thought it was important to kind of get those contracts in place, and I just have to be really a big shout out to our market access team. They did a phenomenal job and negotiating these contracts and really, I think, negotiating them on terms that are very favorable [indiscernible] Therapeutics.

[Martine Rothblatt, executive]

Perfect. Thanks, Michael. Operator, we have time for one last question.

[Operator]

We are not showing any further questions at this time.

[Martine Rothblatt, executive]

Excellent. We blow them away. Fantastic. Well, just to wrap up here, as we mentioned at the beginning, United Therapeutics is a very strong momentum story. As a bit of a science nerve, I've got to point out that momentum is mass times velocity. And our mass is truly formidable. We have a huge fault of intellectual property. We've got over 1,000 top of their game science, marketing and allied health professionals among our employee base and others have pointed out that we have a fortress balance sheet. So all of that is really, as Michael would say, an armamentarium of math. And then in terms of velocity, UT really prides itself at moving at an entrepreneurial speed and the speed that we're moving in is in the direction of ever greater evasion and then ultimately, a revolution in manufactured organ alternative products. Thank you so much for participating in the call today, and I'll turn it back to the operator to wrap it up.

[Operator]

Thank you for participating in today's United Therapeutics Corporation Earnings Webcast. A rebroadcast of this webcast will be available for replay for one week by visiting the Events and Presentations section of the United Therapeutics Investor Relations website at ir.unither.com.