Q3 2024 United Therapeutics Corp Earnings Call
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Speaker Change: Good morning and welcome to the United Therapy Dix Corporation, a third quarter, 2024 earnings webcast.
Dave: My name is Dave and I will be your conference operator today.
Dave: All participants on the call portion of this webcast will be an elicit only mode.
Dave: and told the question and answered portion.
Dave: of this earnings call. If you would like to ask a question during the call simply press star and then one on your telephone keypad. If you would like to withdraw your question, please press star and then two.
Speaker Change: Please note this call is being recorded. I would now like to turn the webcast over to Dewey Steadman, head of investor relations at United Arab Udik.
Dewey Steadman: Thank you Dave and good morning. It's my pleasure to welcome you to the Notta Therapy Dec Corporation, 3rd quarter 2024 earnings webcast.
Dewey Steadman: Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events, and these statements involve risks and uncertainties that may cause actual results to differ materially.
Dewey Steadman: Our latest SEC filings, including Forms 10-K and 10-Q, contain additional information on these risks and uncertainties, and we assume no obligation to update these forward-looking statements.
Dewey Steadman: Today's remarks may discuss the progress and results of clinical trials or other developments with respect to our products. And 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.
Dewey Steadman: Full prescribing information for the products are available on our website.
Speaker Change: Accompanying me on today's call are Dr. Martine Rothblatt, our Chairperson and Chief Executive Officer, Michael Benkowitz, our President and Chief Operating Officer, James Edgmond, our Chief Financial Officer and Treasurer.
Speaker Change: Dr. Lee Peterson, our Executive Vice President of Product Development and Xenotransplantation and Pat Poisson, our Executive Vice President of Technical Operations.
Speaker Change: Note that Pat Poisson and I will participate in a fireside chat session and one-on-one meetings at the UBS Global Healthcare Conference outside of Los Angeles on November 12.
Speaker Change: along with Harry Silvers from our investor relations team, I will be at the Oppenheimer Rare Disease Day in New York City on December 12th. And finally, Martine Rothblatt will present at the 43rd Annual J.P. Morgan Healthcare Conference in San Francisco in January.
Speaker Change: Our scientific, commercial, and medical affairs teams will present at the Phenomenal Hope 2024 on December 6th in Boston and at the Pulmonary Vascular Research Institute Annual Congress in Rio de Janeiro in late January.
Speaker Change: Now, I will turn the webcast over to Martine for an overview of our third quarter 2024 financial results and the business activities of United Therapeutics. Martine?
Martine Rothblatt: Thank you, Dewey, and good morning, everyone. We have slides available for reference, and I encourage you to review those at your leisure. I'm not going to speak directly to the slides.
Martine Rothblatt: United Therapeutics is a momentum story. We continue to reach and exceed our goals, quarter after quarter, year after year, in all three waves of growth, foundation, innovation, and revolution.
Martine Rothblatt: For our foundation wave, driven by our current commercial business, United Therapeutics posted its sixth consecutive quarter of record revenue, led by double-digit growth for Tyvaso, both nebulized and DPI, Orenatram, and Unituxin.
Martine Rothblatt: We also have a record number of patients on Tivaso DPI, Orenatram, and Remodulin.
Martine Rothblatt: We remain confident in the potential for our current commercial business to continue to drive double-digit revenue growth in the near and mid-term as our innovation wave starts to reach the market.
Martine Rothblatt: Our innovation wave is on the cusp of generating significant registration phase data with the Teton 2 study of nebulized TiBaso in idiopathic pulmonary fibrosis expected to report top line data in the second half of 2025.
Martine Rothblatt: As we progress toward full enrollment for Teton 1 by the end of this year, data for that study will not be far behind.
Martine Rothblatt: In 2026, we expect to complete our Advanced Outcomes Study of Relenopag in PAH.
Martine Rothblatt: And finally, in 2025, we expect FDA action on our recently submitted pre-market approval application for our Centralized Lung Evaluation System, or C-LESS, ex vivo lung perfusion technology.
Martine Rothblatt: Beyond our record-setting commercial performance, we expect a steady stream of clinical data reads and regulatory actions through the next 36 months, setting our company up well for continued growth through the balance of the decade.
Martine Rothblatt: Our revolution wave is also making tangible progress toward reality with our phase one study for miro-liver ELAP now underway, the first clinical study of a bioengineered organ alternative. We expect data from this initial safety study in 2025.
Martine Rothblatt: Also, within our revolution wave, we recently received feedback from the FDA regarding our IND for our eukidney 10 gene edited porcine xenokidney, and we expect to file our IND shortly for what will be the first clinical study of a xenoorgan.
Martine Rothblatt: We look forward to sharing more details on our clinical trial design and commercial opportunity in the future following acceptance of our IND.
Martine Rothblatt: To close, I want to reiterate that our momentum is strong and growing. We have double-digit revenue growth from our thriving commercial business.
Martine Rothblatt: and we're moving into the clinic with revolutionary organ alternative technologies. In short, there is no other biotech with the vision, grit, and determination as United Therapeutics.
Speaker Change: Thank you, Martine.
Speaker Change: I'd like to provide an update on our capital allocation strategy, specifically regarding our Accelerated Share Repurchase Program, or ASR, that was announced in late March 2024, earlier this year.
Speaker Change: As you recall, we entered into an ASR agreement with Citi to repurchase $1 billion of UTHR common stock.
Speaker Change: 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.
Speaker Change: which repurchase shares we are currently holding as treasury stock on our balance sheet.
Speaker Change: The approximately 3.5 million repurchase shares represent approximately seven percent of our outstanding shares as of the program's initiation date.
Speaker Change: 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.
Speaker Change: Since the program's announcement in late March 2024, our stock appreciated 47% through September 30th.
Speaker Change: The completion of this ASR program demonstrates our commitment over the last 12 months to all of our capital allocation priorities.
Speaker Change: First, through our innovative clinical development pipeline, as well as CAPEX to support our DPI manufacturing facility in North Carolina, and our clinical-scale xenotransplantation DPF facilities in Virginia and Minnesota.
Speaker Change: Second, through the acquisition of IVIVA and Miramatrix, as well as an in-licensing agreement to support our small molecule business.
Speaker Change: And finally, through successful completion of this ASR.
Speaker Change: Looking ahead, we remain committed to all three 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.
Speaker Change: 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.
Speaker Change: And our third priority, to return capital to shareholders like share repurchases.
Speaker Change: and we'll continue to consider all three priorities when deploying our financial capital.
Speaker Change: 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.
Speaker Change: 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 and pulmonary fibrosis
Speaker Change: and Relenipag in Pulmonary Hypertension and our Revolutionary Organ Alternative Program.
Speaker Change: On a separate note, in the third quarter, we recorded under Selling, General, and Administrative Expenses a litigation accrual of $65.1 million in connection with a potential judgment in the Sandoz case.
Speaker Change: I'll now turn the call over to our President, Michael Benkowitz.
Speaker Change: who will give an overview of our commercial performance.
Speaker Change: Michael
Michael Benkowitz: 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.
Michael Benkowitz: which represents a 23% growth from the third quarter of 2023.
Michael Benkowitz: Achieving this $3 billion revenue run rate just eight quarters after suppressing 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.
Michael Benkowitz: Before I provide the usual product performance overview, I want to express my thanks and congratulations to my fellow Unitharians for their incredible effort and success.
Michael Benkowitz: 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.
Michael Benkowitz: growth and utilization by PHILD patients, an increase in pricing, and enhanced commercial utilization following the implementation of the Part D redesign provisions under the Inflation Reduction Act.
Michael Benkowitz: Tyvaso has solidified its position as the number one prescribed process cyclin treatment in the U.S. across both nebulizer and dry powder inhaler delivery systems.
Michael Benkowitz: Referral and start patterns remained very robust, and the franchise saw record commercial and total patience.
Michael Benkowitz: reinforcing our confidence in the durability of our growth profile.
Michael Benkowitz: We're also seeing the benefit of the Salesforce expansion and realignment that went into effect at the beginning of this year.
Michael Benkowitz: Through the third quarter, we have grown our prescriber base by almost 15% while still maintaining prescribing depth, measured as those physicians with three or more Tybasso patients.
Michael Benkowitz: Forty percent of these new prescribers are ILD physicians.
Michael Benkowitz: which is important to grow the PHILD market and eventually the IPF and PPF markets if our clinical trials and those indications are successful.
Michael Benkowitz: We also reported record revenue for Renitram at $113 million for the third quarter, representing a 23% growth from the same period last year.
Michael Benkowitz: This increase was driven by increased demand, higher commercial utilization, and pricing adjustments.
Michael Benkowitz: As with Tyvaso, referral and start patterns remained strong and we ended the quarter with a record number of commercial and total patients.
Michael Benkowitz: We are seeing increased utilization of the expedite induction protocol, where PAH patients initiate troprostenal therapy on remodulin and then transition to a renitram.
Michael Benkowitz: Over time, we could see the average orenotram dose per patient increase as patients are able to reach a therapeutic dose more quickly with this approach.
Michael Benkowitz: Worldwide revenue for remodeling was 128 million, a slight decline of 2% from last year due to international order timing.
Michael Benkowitz: 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 nine months of the year, U.S. remodeling revenue was up about 12% from the same period in 2023, reflecting the continued strength of the brand despite competition on multiple fronts.
Michael Benkowitz: Looking deeper, U.S. remodulin referral and start patterns remain very strong. Remodulin remains the most prescribed parenteral process cyclin in the U.S. with sustained demand for both intravenous and subcutaneous administration.
Michael Benkowitz: And this comes five years after the first launch of a generic version of remodeling.
Michael Benkowitz: Finally, Unituxin also achieved record revenue of $61 million for the third quarter, up 19% from the prior year quarter.
Michael Benkowitz: U.S. revenue for Unituxin was $58 million, driven by both price and volume increases.
Michael Benkowitz: This growth demonstrates the product's strong market presence and the effectiveness of our commercial strategies.
Michael Benkowitz: 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.
Speaker Change: Martine, I'll turn things back to you to run the Q&A.
Speaker Change: Martine, do we still have you?
Speaker Change: We have lost connection with Martine.
Speaker Change: So, Dewey, you want to run it?
Dewey Steadman: Yeah, I'll run the Q&A. Operator, can we have our first question, please?
Speaker Change: Yes, we will now begin the question and answer session to ask a question you may press star then one on your touchtone phone
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Joseph Thorm with TD Cowan. Please go ahead.
Joseph Thorm: In the expedite, maybe how would you expect this to impact the revenue line, maybe going forward? Thank you.
Joseph Thorm: Thank you. Thank you. Thank you.
Speaker Change: I think on the first part in terms of the down titration offer of remodulin to a renatram,
Speaker Change: I wouldn't say this is a trend yet or I guess a widely used practice. I mean, we have heard at the at the margins that there's some some patients are able are able to do that. But I think the jury's still out on whether that's going to become like a widespread trend. I would point back to kind of how.
Speaker Change: to remodeling performance during the quarter, which is certainly showing that.
Speaker Change: Yeah, that brand's continuing to grow and there's certainly still a place for remodeling and parenteral prostacyclin therapy.
Speaker Change: in NPAH. Regarding expedite and the transition from remodulin to orenotram, the short answer to that is yes, we do expect higher doses with orenotram as a result of the expedite protocol. We're seeing...
Speaker Change: It's a higher average dose, right? Because the idea is that you start a patient on remodulin, you titrate them up to, you know, a range of a dose, and then you're able to transition them over to a Renitram, and you're able to get them up to a therapeutic dose.
Speaker Change: in some cases as soon as a month, but I would say in kind of a one to two month range, which would normally take, if you're starting de novo, it could take up to six months.
Speaker Change: And then from there, depending on how the patient's doing, you can continue to titrate up. So as a result of that, as we see more patients coming to a Renatramp from remodulin, we're gonna see that average dose for a Renatramp to continue to tick up over time.
Speaker Change: Thank you, Michael. Great answer. Next question, please.
Speaker Change: And the next question comes from Rowena Ruiz with Lear Inc. Partners. Please go ahead.
Rowena Ruiz: Great morning everyone. So I noticed that the nebulized Tybaso 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?
Rowena Ruiz: and was there a piece of that where, if you're observing, are there more patients transitioning from nebulizer to DPI eventually?
Speaker Change: Thanks, Rowanna. Michael, you definitely have the most knowledge of us on that, so if you could answer.
Michael Benkowitz: Sure. Well, I think some of the year-over-year growth in the nebulized type ASO is a function of some of the destocking that we saw last year.
Michael Benkowitz: And so that maybe explains some of the delta, but I would say generally from a training standpoint.
Michael Benkowitz: I think we've reached kind of a really nice kind of steady state in terms of the mix of DPI.
Michael Benkowitz: and Nebulizer, it's roughly two-thirds, one-thirds in favor of DPI. And we're starting to see, you know, really both of those, both of those growing. I would say transitions back and forth between the products, Nebulizer to DPI, or DPI to Nebulizer, or...
Michael Benkowitz: 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 into DPI, we did see obviously a significant number of nebulizer patients transition over to DPI, but that's largely played out. So it's really, I think, more case by case.
Michael Benkowitz: How's the patient doing on one delivery system versus the other? And then, you know, the nice thing about our portfolio is the doctors can toggle back and forth as they need to, depending on how the patient's doing.
Speaker Change: Thank you so much, Michael. Operator, next question.
Speaker Change: And the next question comes from Andreas.
Speaker Change: Ardredges with Oppenheimer. Please go ahead.
Speaker Change: Good morning and thanks for taking our questions and congrats on another solid quarter. We have some capital allocation questions, just one or two parts here, but can you talk about Paveso and Paveso VPI manufacturing capacity needs to support IPF?
Speaker Change: Will additional investment need to need to take place and then along the share repurchase program. How are you thinking about potential? to run another program Especially given the lead-up into the IPF. Thanks
Speaker Change: Okay, thanks for those questions. And by the way, thanks to Oppenheimer as well for convening a Rare Disease Day that we'll be very proud to present at. Our whole community appreciates that. Those two questions are best addressed by James. So James, can you take it from here?
James: 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 ICF. And we do not expect
James: which we talked about previously a 500 million dollar investment in a new in a new manufacturing facility for type A SODPI and the thinking of expanding that
James: 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.
James: So we don't expect...
James: any, we expect to be able to support that, don't expect.
James: any shortages or anything like that going forward at all.
Speaker Change: 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.
Speaker Change: And, as I also mentioned, over the last 12 months, we've actually demonstrated our commitment to all three capital allocation priorities.
Speaker Change: to various opportunities and going forward we're going to continue to thoughtfully evaluate the deployment of capital in all our capital allocation priorities.
Speaker Change: going forward. So investing in ourselves and our facilities through thoughtful corporate development but also through potentially ASRs.
Speaker Change: Again, at this point, we're not calling specifically out an ASR going forward, but it's going to be in our calculus going forward as we look at all our capital deployment.
Martine Rothblatt: So Martine, back to you. Okay. Thank you, James. That's, I love how you covered all 360 degrees to that question. Excellent.
Martine Rothblatt: Operator, next question.
Speaker Change: And the next question comes from Roger Song with Jeffries. Please go ahead.
Roger Song: Great congrats for the quarter and thank you for taking our question. Maybe my question is related to the modulants. Since your sales is pretty reaching a pretty good kind of steady state with a slight growth, just curious about the nuance between IV versus sub-q against the generics and then shall we see some regrowth from here? Thank you.
Speaker Change: Okay, Roger, thank you for your question and the compliments on the pullout order. Yes, and thank you also for recognizing the growth in the remodeling patients. I think Mike would have all of the answers at his fingertips to the questions you asked.
Michael Benkowitz: Mike? Sure, thanks. Yep, thanks Martine. Thanks for the question, Roger. So, with respect to remodeling, I mean, I think we've, we have ever since...
Michael Benkowitz: We were on the cusp of a generic launch, been very confident about the durability and resilience of the brand through.
Michael Benkowitz: through generic competition and then even through the introduction of other
Michael Benkowitz: one of the go-to drugs, one of the best drugs that we have.
Michael Benkowitz: 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, you know...
Michael Benkowitz: Naturally, they're going to want to try and
Michael Benkowitz: experiment or use these less invasive options before moving to a modulant.
Michael Benkowitz: 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 parenteral prostacyclin.
Michael Benkowitz: That's really why over time we've been very, I think, confident in the durability of the Remodulin product.
Michael Benkowitz: and we continue to feel that that will be the case going forward.
Michael Benkowitz: 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 remodeling and a Renitram.
Michael Benkowitz: starting on remodeling, going to a rent-a-tram, moving up to a rent-a-tram. But even those patients, at some point, may need to go on remodeling. So you may see some variability there over the next few years as the expedite...
Michael Benkowitz: approach continues to take hold. We have another we have another trial that.
Michael Benkowitz: you know, return the hemodynamics to a normal level and then transition those patients over to a Renitram as a maintenance drug. So we continue to feel very strongly that there will be a place for remodulin in the PAH armamentarium now and in the future.
Speaker Change: Excellent, Mike. I love when you use the word armamentarium. That describes the story. Yeah, well it like hits UT, you know, right at the bullseye. Perfect. Operator, next question.
Speaker Change: Yes, and the next question comes from Jessica Sy with JPMorgan. Please go ahead.
Jessica Sy: Great, good morning guys. Thanks for taking my question and congrats on what sounds like some favorable pre-IND feedback for the 10 gene edit you know 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 an initial clinical trial?
Speaker Change: Sure, Jessica, and so nice to hear your voice this morning as well. We have on our call Dr. Lee Peterson. She's in charge of all genotransplantation. So, Lee, could you address Jessica's question?
Lee Peterson: Yeah, sure. Thanks for the question. You're right. We did receive some pre-IND feedback from the FDA on our eukidney, which is the 10-gene edited porcine xenokidney.
Lee Peterson: and we're working very hard to submit that IND shortly.
Speaker Change: We haven't, I mean, we really don't want to...
Speaker Change: share all of the details until it's officially cleared by FDA and which is you know IND clearance. So we're really looking forward to sharing that design with you later but we need to get that IND cleared first.
Speaker Change: Thank you so much, Lee. Great answer. Operator, next question, please.
Speaker Change: And the next question comes from Ash Verma with UBS. Please go ahead.
Speaker Change: Great. Thanks for taking my question. So, just good to see you get to the $3 billion annualized revenue run rate. I know you had previously outlined this goal of reaching
Ash Verma: 4 billion run rate in 2025. Are you still on track to get there?
Ash Verma: And then secondly, in the last quarter, you made a mention of potential rebating contracting.
Ash Verma: 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? Thanks.
Speaker Change: 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 a $1.5 billion to a $3 billion revenue run rate so rapidly.
Speaker Change: As we've mentioned throughout the call and in the earnings release,
Speaker Change: And actually, as we've been forecasting for the past several quarters, we feel very comfortable
Speaker Change: 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 three waves that we talk about.
Speaker Change: So, if you just do the math, you know, 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, 5, 6 and beyond revenue run rates and that's what we're targeting.
Speaker Change: Mike, can you talk about the competitor environment question?
Mike: Sure, and I think your question was specifically around some of the payer contracts we've entered into or in the process of entering into. So we did have some that...
Speaker Change: started. This is mainly on the Part D side where we haven't, with the Part D pairs, where we historically have not contracted. So we had a couple that went effective July 1st.
Speaker Change: We have a couple, I think, that kick in October 1st.
Speaker Change: And then I think one...
Speaker Change: one that kicks in January 1st.
Speaker Change: So by January 1st, they will all be in play. So we did see a little bit higher growth in that, particularly on DPI and 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.
Speaker Change: very favorably for when a competitor comes on the market because we will at that point have...
Speaker Change: have rebate dollars already flowing through the payers and we have, you know, parity and non-disadvantaged language. So, I think they're going to be reluctant to...
Speaker Change: You know, just turn those off overnight. And so we thought it was important to kind of get, you know, get those contracts in place. And I just have to give a really big shout out to our market access team. They did a phenomenal job.
Speaker Change: Negotiating these contracts and really, I think, negotiating them on terms that are very favorable to United Therapeutics.
Speaker Change: Perfect. Thanks, Michael.
Speaker Change: Operator, we have time for one last question.
Speaker Change: We are not showing any further questions at this time. Excellent. We've blown them away. Fantastic.
Speaker Change: Well, just to wrap up here...
Speaker Change: As we mentioned at the beginning, United Therapeutics is a very strong momentum story. As a bit of a science nerd, I've got to point out that momentum is mass times velocity.
Speaker Change: and our mass is truly formidable. We have a huge vault of intellectual property. We've got over a thousand top of their game science, marketing, and allied health professionals among our employee base.
Speaker Change: and others have pointed out that we have a fortress balance sheet.
Speaker Change: So all of that is really, as Michael would say, an armamentarium of math.
Speaker Change: 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 innovation and then ultimately a revolution in manufactured organ and organ alternative products.
Speaker Change: Thank you so much for participating in the call today, and I'll turn it back to the operator to wrap it up.
Speaker Change: Thank you for participating in today's United Therapeutics Corporation earnings webcast