Q1 2023 United Therapeutics Corporation Earnings Call

Speaker 1: So.

Speaker 1: Be going.

Speaker 2: Good morning and welcome to the United Therapeutics Corporation, 1st quarter 2023 earnings webcast. My name is Danielle and I will be your conference operator today. All participants on the call portion of this webcast will be in listen only mode until the question and answer portion of the earnings call.

Speaker 2: 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, please press star and then the number two. Please note this call is being recorded. I would now like to turn the webcast over to Dewey Stedman, Head of Investor Relations at United Therapeutics.

Speaker 3: Thank you, Danielle, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation First Quarter 2023 Poly Mustang International operations webcast.

Speaker 3: Accompanying me on today's call are Dr. Martine Rothblatt.

Speaker 3: our President-in-Chief Operating Officer, James Edgeman, our Chief Financial Officer, and Treasurer, and then Pat Poison, our Executive Vice President of Technical Operations, and finally, Dr. Lee Peterson, our Senior Vice President of Product Development.

Speaker 3: 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 filing, including forms 10K and 10Q, contain additional information on these risks and uncertainties. And we assume no obligation to update these forward-looking statements.

Speaker 3: Today's remarks also 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.

Speaker 3: full prescribing information for these products are available on the products website. Now I will turn the red cast over to Dr. Rothbite for an overview of our first quarter 2023 financial results and the business activities of United Therapeutics. Martin.

Speaker 4: Thank you, Kiwi.

Speaker 5: Very excited to welcome everyone to another great quarter at United Therapeutics.

Speaker 5: We are thrilled to continue on course toward our mid-decade goals of 25,000 patients being treated for pulmonary hypertension and the doubling of our revenue run rate.

Speaker 5: This quarter, we move toward those goals with double-ditch of revenue growth from first quarter 22 to first quarter 23.

Speaker 5: And that also includes, by the way, nearly 40% growth in our main growth driver, which is Tiveso.

Speaker 5: I think our double-digit growth rate remains a solid forecast, even with the possibility of new FDA approvals of Socaticept or Liquidia.

Speaker 5: The reason is that Sotatricept has not even been tested in our main growth market of group 3 pulmonary hypertension.

Speaker 5: Indeed, systemic drugs are generally contraindicated there due to them causing VQ or ventilation perfusion mismatch.

Speaker 5: When the disease Tathercept was tested in group 1 pulmonary arterial hypertension, we expect it to be complementary to either our Renetram, Tiveso, or Remodulin products.

Speaker 5: So we don't forecast a realistic threat from Sir Catterse to our growth.

Speaker 5: The season of Aquitia, if approved, also does not challenge our projected double-digit growth is because it is not a generic product, but is instead a strongly differentiated drug device product, requiring 65% more drugs to even match Ivacos effect.

Speaker 5: based on their own clinical trial data. Also exciting to report this quarter is robust progress in our pipeline. We are spot on target of fully enrolled our current big phase three trials by the end of next year.

Speaker 5: each of which have their own billion dollar potential.

Speaker 5: In other words, the pipeline embeds more than double our current total revenues and then there is the aforementioned organic doubling of our revenues from our existing products already commercialized and now entering the market such as Taibaso DPI,

Speaker 5: for immunity and our new Orenotram dose-hydration kit.

Speaker 5: I'm also very excited to report big news on the use of capsule front.

Speaker 5: We have allocated a half billion dollars to a new Taiveso DPI manufacturing facility in Search Triangle Park, North Carolina with 50,000 patient capacity.

Speaker 5: And by the way, this is in addition to our existing nearly $100 million allocation of capital to our new clinical xenotransplantation facility in Virginia. By the way, speaking about transplants, we have a question from the audience.

Speaker 5: I'd like to thank the dozens of shareholders and other stakeholders who sent me any silver scene superb story of her heroism in the face of heart transplant and immunosuppressants.

Speaker 5: In that vein, I wanted to take a moment to update everyone on what we as United Therapeutics are doing to effectuate Amy's quest.

Speaker 5: differentiated cells from patients back to stem cells called iPSCs or inducible pluripotent stem cells.

Speaker 5: By the end of this year, we'll be creating IPFCs from two patient donors every single month. In our own labs, we differentiate cells into different types of cells, need for civilizing different organs, such as lung.

Speaker 5: including stromal cells and bifilio cells, and different types of alveolar cells.

Speaker 5: In our own labs, we grow differentiated cells in 3D changes into the billions of cells needed to cover each organ.

Speaker 5: Indeed, in our own labs, over the past three years, we have produced about 2 trillion cells every year.

Speaker 5: Also, in our own labs, we cellularize our organ scaffolds with the cells that we have expanded.

Speaker 5: Indeed, last month we achieved a kind of bahawk level of proof of concept for one of our own cellularized lungs, provided a pig model with the level of oxygen considered acceptable for human lung transplants.

Speaker 5: Again, in our own labs, we produce this time under GMP conditions about 500 lung scaffolds every year and are now working on 3D printing kidney and liver scaffolds in partnership with 3D systems.

Speaker 5: In short, Amy's vision of an immunosuppressant-free organ transplant is realistic for this decade, the 2020s. Since rampaging up this?

Speaker 5: Here at United Therapeutics, we expect to have patient derived stem cell differentiated, opolicus lungs, kidneys, and livers in the clinic within five years.

Speaker 5: Parts could also be done.

Speaker 5: No immunosuppressants would be needed because the transplanted organs will have the same DNA as a patient. So it is really the best of times here at United Theorem Putics with record revenues, another half billion dollar quarter.

Speaker 5: record pipeline potential, $2 billion plus opportunities, and record deployment of capital and business expansion.

Speaker 5: At UT, our mantra is, go big or go home.

Speaker 5: We are going big on pulmonary hypertension. We are going big on pulmonary fibrosis.

Speaker 5: follow-up or give. Mike Vankewitz, our president and chief operating officer, will now give you a deeper dive into the business. Mike?

Speaker 5: Thanks, Martine, and good morning, everyone. We're pleased to report yet another quarter of meaningful growth.

Speaker 6: for our tarpossil business and as Martine said we're really excited to have quarterly revenues of more than 500 million for the second time in our company's history. As usual I'm going to provide some color around what we're seeing with respect to each of our tarpossil products. Taiveso, Remodulin, and OrenoTram.

Speaker 6: For Tiveso and Tiveso DPI, underlying physician and patient demand for Tiveso remained exceptionally strong in the first quarter, as we continue to grow our Tiveso active patients at a clip consistent with the patient growth trends for the prior three quarters.

Speaker 6: during the first quarter.

Speaker 6: We also continue to increase the breadth and depth of the Taiveso prescriber base.

Speaker 6: Since the PHILD launch in 2021, we have now doubled the number of tybaso prescribers. This is our breath metric.

Speaker 6: And in terms of prescribing depth, I've mentioned on prior calls that our key metric here is the number of prescribers with three or more type A subpatients.

Speaker 6: I'm really happy to report that we've also doubled the number of prescribers in this category. The three plus Taiveso prescribers now represent about 40% of all prescribers, which means we still have an opportunity to expand depth, which should pave the way to further accelerate Taiveso growth over time. The first quarter performance for Taiveso saw the usual early year season...

Speaker 6: So overall, we believe the underlying strength of the Thai Vaiso business is great. Looking at first quarter revenue, as I said in the past, due to the nature of our business, we regularly encourage investors to look at longer term revenue trends compared to quarterly revenue fluctuations.

Speaker 6: With that said, there were three main factors that impacted Kivaso Revenue in the first quarter, given that we're essentially in the middle of two product launches within the Kivaso franchise, PHILD, and then Kivaso DPI.

Speaker 6: First, and as we discussed last quarter, our specialty pharmacies are still right sizing orders for the correct DPI and nebulized mix.

Speaker 6: In the third quarter of last year, specialty pharmacies made significant orders of nebulized Tiveso in anticipation of increased PHILD demand without fully appreciating the potential for Tiveso DPI demand. According to the fourth quarter of last year and the first quarter of this year, the number

Speaker 6: We saw unexpectedly strong demand for Taiveso DPI, relative to nebulized Taiveso, and the specialty pharmacies needed to reduce its nebulized inventory.

Speaker 6: which reduced high-vehsile revenue well under patient, well under actual patient demand, the fourth quarter of 2022, and the first quarter of this year.

Speaker 6: Second, we're seeing a higher level of path utilization for type A of DPI than we expected.

Speaker 6: We believe this is a short-term phenomenon and will subside to a large degree when the Medicare changes that are part of the Inflation Reduction Act go into effect starting next year.

Speaker 6: Finally, due to the incredible demand for DPI and the fact that we launched immediately upon approval without building inventory, we have not been able to allow specialty pharmacies to up to their contractual minimum inventory each month.

Speaker 6: Based on our DPI demand trends and forecasts, this is something that could persist for the balance of the year.

Speaker 6: Having said that, we are taking steps to increase DPI production capacity in both the short and medium term.

Speaker 6: First, our partner, Mankind, is activating a second production line and additional kitting capacity from which we expect to see increased DPI supply as soon as this quarter.

Second, and in parallel, mankind is also on track to significantly expand manufacturing capacity in the first half of next year to support up to 25,000 Tyvacer DPI patients a year.

And finally, as Martine mentioned, we have initiated a construction project to build the new UT-owned and operated Taiveso DPI manufacturing facility.

That facility is intended to provide enough capacity to support an additional 50,000 DPI patients per year and with expansion capacity for up to 75,000 DPI patients.

Turning to Remodulin, this business continues to be incredibly resilient even though it's faced a generic competitor for almost four years now.

We saw the second highest number of referrals for Remodulin in the first quarter. And after a small dip in active patients following the generic launch of a subcutaneous version of Remodulin, our active patients are back to pre-generic levels.

Remunity continues to gain traction in the market, as it is the only subcutaneous pump widely available for a new remodeling patient starts, with Remunity representing over half of our monthly sub-Q remodeling shipments during the quarter. Finally, a rennetram had a very solid quarter achieving record number of patients on therapy and record revenues. We launched a 90-day titration kit during the first quarter, which simplifies dosing and...

patients shift to oral therapy and in a swear period of time as compared to patients who do not have a remodeling induction.

We expect to publish a peer-reviewed manuscript detailing this study in the coming months.

To wrap up, we're very pleased with the overall Traprasum business, led by the incredible demand for Tiveso DPI. And we believe we're on our way to hitting our goal of a $4 billion revenue run rate. And we're very pleased with the overall demand for Tiveso DPI.

With that, I'll turn the call back over to Martín to start the Q&A session.

Thank you so much, Mike. Those were terrific insights into everyone in the project. We appreciate that call that you shared with everyone. Operator, could you please open the phones and I will sort the questions to the person most appropriate for answering them.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.

At this time, we'll pause momentarily to assemble the roster.

The first question comes from Joseph Thome of TD Cohen. Please go ahead.

Hi there, good morning and thank you for taking my question. Mike, I know you mentioned that the Tyvazor DPI, the continuations are a little bit lower than what you're seeing with the Nebulized Tyvazor. Maybe what are the expectations for the Tyvazor DPI average time on therapy versus what you were seeing with the Nebulizer.

And as we see Sotadarcept potentially launching maybe next year, do you expect the Taiveso time on therapy could actually increase as these patients kind of continue to do maybe better than they did without Sotadarcept? Or would they instead maybe ramp down their process like when you say, how do you expect that to kind of play out? Thank you.

I'll not look like I own Drex's question to you. Sure. Thanks, so I think overall we're really encouraged by the lower level of discontinuation rates with Hadesu DPI and we do think that that offers well for increased time on therapy.

To put a number on that, I think it's still a little early to kind of, you know, kind of say definitively what that's going to be. But certainly a patient satisfaction has been really high with Tiveso DPI. I think it's led to better adherence, better compliance, and that leads to patients doing better, and then that will ultimately lead to patients staying on therapy longer. So I think you're

your premise, your hypothesis that time on therapy will increase with DPI over time is absolutely right. That's something we're certainly expecting. Similarly, I think cetatorcept probably helps in that regard as well. If you look at the underlying data, the cetatorcept study, 70 percent of the patients in that study were on a background process cycling. So as Martine said in her opening comments. Dr.

We think there's a lot of complementary effects between process cycling and cetatircep, and so we would, you know, we would expect that, you know, when cetatircep is launched into the market, that that will continue, and patients will experience a nice benefit between the two products as well as the other products on background therapy and should continue to lead to increased time on therapy.

Thanks, Mike. Operator, next question, please. The next question comes from Hartash Singh of Oppenheimer. Please go ahead.

Great, thank you. Nice update everybody and thanks for the question. You said a question on or tram and the expedite study. I know what the last year in Barcelona really big updates there and educating the patient physician community. Seems like an ATS this year again, you will kind of delve into that.

If you can just talk to us a little bit about what the patient flow is, are patients mostly starting on Remodulin and then going over to Ornatram? Or are they still starting on Ornatram? Or what's the breakdown? And then, you know, how can we...

expect sort of, you know, that to benefit Orange Ram going forward? I know it already is, but could that add even more going forward? Thank you. Great question, Harkash. Good choice this morning. Mike, I think, you know, you'd be, again, be the best person to address that question.

Sure. Thanks, Artai, for the question. So in terms of kind of the mix of patients between starting de novo on a Renisham and transition from Miradulin, I think it's roughly 65, you can call it 65, two-thirds roughly, two-thirds of patients are starting de novo on a Renisham right now. And as I mentioned in my comments, I think the fact that we've got that new titration kit, I think that's a good thing.

But I also think it's true that, you know, a Taivesa DPI is...

proving to be so convenient for patients that it's almost sort of your gateway drug to process cyclin. So I think over time you're going to see a higher number, a higher percentage of patients initiate process cyclin therapy on DPI even over over the orals both arerenitrim and Celexipag. And so the thing that we really like about

the expedite data and then the artisan study, which we talked about on prior calls, is an opportunity to take these maybe functional class, three patients, or even four patients in the case of artisans, start them on a module and get their hemodynamic.

and continue to titrate up as you need. And then if they continue, if over time they decline, you can obviously switch them back to a modulin. But we really see that as sort of a key position for our Renetram as we move forward over the next several years. And in some, it really just kind of speaks to the flexibility of.

and the fact that we've got these different delivery options. And so it really just, I think, allows us to kind of meet the patient, the physician, where the patient is in their disease progression. Great. Thanks so much, Mike. That was really beautiful the way you were able to describe that. Yeah, it was great.

Artisan and expedite in the whole

rapid transition to oral, we're able to get patients into a stable equilibria, if you will, with their pulmonary artery pressures down around, I would say, you know, below 40 millimeters of mercury. And there's like an increasing volume of data out there, well over a dozen scientific...

the papers, of the data that the papers had access to.

And those are papers by independent physicians, not from us. So we really believe that our initial mission of the company of being able to keep patients with pulmonary hypertension, living with pulmonary hypertension, instead of dying from pulmonary hypertension, has been very largely achieved with the combination of the

of a parental prosthetic cycle into rapidly get their pressures down and then oral prosthetic cycle and run a tram to be able to keep them stable for the long term.

Operator, next question.

The next question comes from Jessica Fye of JP Morgan. Please go ahead.

Hey guys, good morning. Thanks for taking my question. On the plans to increase capacity for Tyvese DPI, that sounds pretty bullish with respect to the anticipated demand trends there and it sounds like you're seeing nice net patient ads as well, but can you just confirm whether there's any capacity constraint on DPI right now that's at all limiting to patient ads?

Or is it that you're keeping up with patient demand? And then in the near term, the capacity is maybe just keeping those especially pharmacies from reaching target inventory levels. And just related to that, I think you said, Ty-V so net patient ads were in line with the past three quarters. Can you just remind me what that run rate was that you're tracking in line with? Thank you.

Okay, thanks so much for the questions, and good to hear your voice this morning. There were several questions there. So let me start with the production expansion questions. And then Mike, if you could queue up your responses to the rest of the questions that Jeff asked there.

So, just so we are pretty bullish on our forecast for Taivea so deep the eye.

And the maximum capacity of the mankind facility up in Danbury, Connecticut, will be by the beginning of next year, will be for 25,000 DPI patients. So we'll be entering 24.

with a capacity for 25,000 patients. Now, as I mentioned in my introductory remarks, our company's goals for the middle of the decade are 25 being able to treat 25,000 pulmonary hypertension patients.

So if a large proportion of those 25,000 patients are on type A, so DPI, which is, I think, reasonable, then it would be like, well, where is the production capacity for the go big on pulmonary fibrosis? Where is the production capacity?

for what we think the pulmonary fibrosis market will be. Well, best as we can tell, we expect the pulmonary fibrosis market to actually be for a paveso DPI even larger than the pulmonary hypertension market. So we would need more than an additional 25,000 patients.

pulmonary fibrosis is such that we could easily expect to have 50,000 pulmonary fibrosis patients being treated in addition to the 25,000 mid-decade pulmonary hypertension patients.

So that's the reason why we need to start now deploying a substantial amount of capital to build this brand new Tiveso DPI production facility in research trying to park North Carolina. As Mike got mentioned, even that facility, even though its launch capacity will be 50,000

75,000 in North Carolina. As we enter the 2026 timeframe, we then have a capacity to support 75 to 100,000 DPI patients, which would cover our needs for both a group one pulmonary hypertension, group three pulmonary hypertension.

idiopathic pulmonary fibrosis, and additional forms of pulmonary fibrosis that go under the rubric of progressive pulmonary fibrosis, which in fact we are embarking on yet additional phase three trial for. Thanks for joining us today.

So Mike with those comments in terms of the production capacity Can you answer the other questions that just sent?

Absolutely. So Jeff, I think your question around, your first part of your question was around

sort of patient demand versus SP demand to build up their inventory. So we're definitely in the category of the latter. So we're not having to halt or delay patient starts on DPI. We're making enough to meet the patient demand. I think that the issue that I was referencing in my opening

to about 30 days. So they generally like to keep at least, always be in a position where they have at a minimum 30 days of inventory on hand. So due to the demand, we're not able to kind of meet that need on the part of specialty pharmacy. Like I said, we have some additional production capacity coming online as soon as this quarter.

That will start to open things up a little bit, but I think really, you know, between, as we're continuing to grow over the balance of the year, we're probably going to be in this situation where they're not going to be able to order up to the levels or they're accustomed to ordering up to until, as Martine said, we get that, you know, the significant expansion next year to get up to 25,000 patients.

Thanks so much, operator. We're ready for your next question.

data in 2025. So based on the phage-3 increase trial in a subgroup of patients with underlying IPF, we saw benefits on FVC up to 16 weeks. So TITAN trial is a 52 week time point. So do you expect...

on FVC to continue to increase to 52 weeks? And then can you comment on powering assumptions for the Teton trials? Thank you.

Thanks. Good morning, Yoon. Nice to hear your questions. I think it would be best to have Dr. Peterson. She is in charge of running the CTON trial. Answer your questions.

Yeah, hi everyone. Thank you for your question. Yeah, so in fact, the increased study, indeed, the main study, the placebo-controlled study was 16 weeks, as you mentioned. However, we do have an open label extension study of the increased data where we've looked at the

to see how the patients do over the longer period of time, including the 52-week time period. And we still see benefits of patients on Taiveso in the increased population. So we feel confident that that will translate to the longer period in the.

in the Teton studies. And as far as the Teton studies, they are definitely...

powered, meaning we have 90% power to detect the difference that we've seen in the increased studies with regard to absolute efficacy. So we have sufficient power to see.

the difference over the 52 week period. So again, we feel confident on that. So awesome. Thank you so much Leigh. Operator, we're ready for your next question. The next question comes from Andreas Argerides of Wedbush Securities. Please go ahead. Good morning and thanks for taking our questions. I think we have some on the quarter.

won't be able to take your follow up and Andreas, thanks for the congrats on the quarter. Your line broke up a little bit but I think the gist of the question was to get an overview of the organ manufacturing situation and when we expect the results of the organ manufacturing to enter into clinical trials and I think you asked something about the capital.

associated with better spending. So the organ manufacturing program is a broad multifaceted multiple shots on gold program, so it won't be really realistic to give a an overview of everything beyond the really exciting things I mentioned this morning that in response to Amy Silverstein's

passionate arguments that part of our organ manufacturing program is strongly focused on organs that would not require immunosuppressants. In other words, autologous organs that are manufactured with the cells downstream from a patient's own. To Mrs.

We then used techniques proprietary to the company to then differentiate those stem cells into the different types of cells that we would cellularize organs with. Other programs at other laboratories within United Veriputics are based on allogeneic cell lines that we are able to MHC segment.

So patients could expect a much lighter immunosuppressant load than if they were just taking kind of an average donor organ. And then let me get to your question about the clinical trials. So the organs we have closest. Is that just thenie

The clinical trials are our Zeno-Harpsin Zeno-Kidneys. These are hearts and kidneys from donor animals that have been grown under the equivalent of good manufacturing practices, conditions, what are called pathogen-free conditions. And they have...

10 genetic modifications that we believe will allow them to surmount hypercute and acute rejection with no more than the normal commercially available immunosuppressants today and be able to continue on to a long-term duration.

in the recipient's body with the management of chronic rejection, as is done today with alligrapants.

So those organs are currently in what's called by the FDA a pivotal preclinical program that means it's the last preclinical program before going into a human study and that program is

Hopefully we will be able to complete that program by the end of 24 and be able to then enter into the first clinical trials in 25. So that would be kind of the bottom line answer to your question that the first manufactured kidneys and hearts hopefully knock on wood should be able to enter into clinical trials.

product positioning and their reception can have an important bearing on what part of your portfolio may get impacted. In your view, does that matter? And what is the assumption that you have on competitors' pricing and line of therapy positioning? Thank you. Thanks for the questions asked.

Like a frontline question, I mean answer, then Michael will give you more of a definitive answer. But as I noted in our introductory remarks, we don't need to intercept having any effect whatsoever on the growth guidance that we provided for our company.

And the reason for that is a lot of people are not completely clear that there are two different diseases that are treated with drugs such as ours that sound very similar and it's easy to get them confused.

So the disease that Sotadercept was tested in and the disease that all of our drugs are approved for, all of our non-cancer drugs are approved for, is called group 1 pulmonary arterial hypertension.

And the acronym is PAH. A different disease is called group 3 pulmonary hypertension, or just group 3 PH. So Tathracept has never been tested, at least in anything published that we're aware of, in group 3 pulmonary hypertension.

The only drug approved for group 3 pulmonary hypertension is Taiveso, including Taiveso DPI. And as Mike described very well, most of our growth in the coming years, we expect to come from group 3 pulmonary hypertension.

So, by definition, cetaterecept cannot have any effect on that growth trajectory whatsoever. In addition to that, within the group one pulmonary arterial hypertension, where we do continue to have growth across our franchise, I think Mike mentioned we had our highest quarterly sales of a Renatram ever.

We expect cetadicept to be complementary. And Mike, would you like to expand on that? Sure. I'll just kind of pick up right there, which is, I think I said in response to an earlier question around this, we definitely look at cetadicept as complementary to our drug and the other drugs that are currently on the market to treat, group 1 PAH.

70% of those patients were on prostacyclin therapy. So clearly there appears to be a complementary or synergistic effect between prostacyclin and cetatasab. So we think that all of the drugs will continue to be used and some physicians that we've talked to have talked about this sort of four corners approach.

of treating PAH, so you have a drug to treat each of the four pathways. How that gets sequenced in, in, you know, in the grand scheme of things, doesn't really matter, because I think that it's still a progressive disease. There was nothing in the stator set data really to suggest that it's a cure.

or even a disease modifying agent. I know there was some speculation that that might be the case, but I don't think that's born out in the data. So clearly, patients are benefiting from it, but I think it's a combination with the other drugs. So we think over time, it's another drug that physicians could add to their treatment on rheumatarium, but it doesn't appear to be something that's going to replace or.

or displace our products. Thanks so much, Mike. And thank you, operator, and everybody for joining our first quarter conference call. I'll do the great work of Dean Eastegman. We'll be presenting at various and sundry health care conferences during the balance of the year. And we look forward to seeing you there and providing additional insights and color on you.

of the United Therapeutics Investor Relations website at ir.unithr.com.