Annual TD Cowen Healthcare Conference. I'm Joe Thome, one of the senior biotech analysts here on the team at TD Cowen. And it is my pleasure to have with me today the team from United Therapeutics. We have President and COO Mike Benkowitz and CFO and Treasurer James Edgemond. Thank you both for joining us. So maybe just to start things off, congrats on the record revenues in 2023. Maybe just give us a brief overview of the company's recent progress and your outlined goals for the rest of this year.
Sure. Thanks, Joe. And thanks for hosting us today. Before I get started, my lawyers want me to say something about forward-looking statements. So there you go. You guys can check out our public filings with the SEC to look at the risks and uncertainties associated with that.
Good? Yeah. All right.
So yeah, 2023 was really a fantastic year for us. And I think it sets us up well for the future. We're really focusing on really last year, this year, and in the future is executing on what we've called the three waves of growth that we've been talking about the last few investor conferences and at our last earnings call. So the first wave is what we call the foundational wave, which is really about commercial execution with respect to our already approved products, continuing on the recent growth trajectory from a revenue standpoint with those products.
The second wave is the innovation wave. Really there we're focused on is development and then eventually commercialization of ralinepag in Pulmonary Arterial Hypertension, PAH, and then Tyvaso in IPF and PPF for Progressive Pulmonary Fibrosis. Then the third wave is what we call our revolutionary wave. That's our organ manufacturing business.
So we now have a really well-rounded, multiple shots on goal approach to developing an unlimited supply of commercial organs in the kidney, heart, lung, and liver space. So that's really, I think, at a high level what we're focused on. Specifically with respect to 2024, it's really four things. One is to continue, like I said, continue revenue growth along the same trends that we saw the last couple of years, 20%+. On the innovation side, we're looking to complete enrollment in the ralinepag study and the two IPF studies with Tyvaso.
On the revolutionary side, we expect to complete the preclinical work for the Xenokidney in this quarter, actually, and then hopefully get a meeting with the FDA later this year that will lead to commencing a clinical trial as early as 2025. And then we're also excited with one of our recent acquisitions, Miromatrix, to begin the first human clinical trial with a bioengineered organ, which is the miroliverELAP.
Perfect. And the company has previously indicated hoping to achieve a $4 billion run rate by the end of 2025. I guess what are sort of the key aspects of the commercial franchise that get you there? And maybe what proportion of that is going to come from Tyvaso versus the rest of the franchise?
Yeah. So we've said $4 billion run rate by mid-decade, so 2025, 2026, kind of in that timeframe. And really, if you just kind of draw a line or extend the growth of the last couple of years out, we're well positioned to do that. The lion's share of that growth will come from Tyvaso, particularly pulmonary hypertension associated with interstitial lung disease, where we are currently the only approved therapy for that disease and continue to make good traction in identifying those patients that are good candidates for that therapy. But we also expect to, at a minimum, maintain Remodulin revenues.
Though even with that said, last year, we actually had modest growth in Remodulin on our U.S. business, which is, we think, pretty phenomenal given that we've had a generic competitor for five years now. We expect Orenitram to continue to grow on the heels of the expedite data, which we published a couple of years ago. We have a new study with Remodulin to Orenitram transitions, which is our artisan study.
Perfect. And obviously, the Tyvaso expansion into PH-ILD has been a huge investor focus and good for the top line. Can you tell us a little bit how many patients have you treated with PH-ILD, or rather, how penetrated into this market are you? Just kind of overall, where is the franchise there in terms of patient finding and how penetrated the drug is?
Yeah. So for PH-ILD, if you look at some of the epi data, it's a pretty broad range. I think the EPI data suggests anywhere from 15%-85% of the 230,000 ILD patients have or will get pulmonary hypertension. We've tended to really kind of focus on the low end of that range, the 15%. So we look at the market as being around 30,000. I think you talked to various KOLs. They say it's significantly higher, but 30,000 is a good number for us to start with. It's almost as large as the PAH market. And as I said earlier, we're the only approved product in that space. So that's really kind of how we think about the size of the market right now.
And then in terms of penetration, we're in kind of the low double-digit range there, kind of in that 10%-15% range, and then continue to make progress every month, every quarter, every year in growing that patient base. And so we've undertaken, I think, several steps, which I'm sure we're going to talk about, to continue to increase that penetration, educate those ILD physicians about pulmonary hypertension, the steps they need to go through to screen those patients. And then at that point, they have a decision about whether they want to treat or refer to a PAH clinic.
And maybe along that point, the company did expand the Tyvaso sales effort and sales force in 2023. Maybe if you can just remind us how large of an expansion this was, maybe what was driving this decision, if anything different than what you just highlighted? And maybe when will we start to see the impact from that expansion in revenues?
Yeah. So I mean, the expansion actually I would say the expansion of our field-based teams actually started about 12-15 months ago. So it was broader than just the sales representatives. We increased our medical science liaisons. We increased a team that we call our regional nurse specialists. So these are nurses that we employ to go in and work with nurses in the office and teach them how to use our products, how to titrate, how to manage side effects. And then we also deployed last year a team of what we call field reimbursement managers. And the goal of that team or the objective of that team is, again, to go work with offices, particularly new prescribers, and help them navigate the reimbursement process, filling out the referral form, how to write an appeals letter.
So educating them on that whole process because it's a pretty complex process for those practices that aren't used to dealing with our therapies. And then the second half of last year, we augmented the sales team. So on a numbers basis, the sales team, we increased, I'd say, by maybe 25%. But really, I think the impact is going to be greater than that because in addition to increasing the size of the teams, we also realigned promotional priorities. So we now have a group of sales representatives that are only calling on ILD doctors and talking about PH-ILD. So the magnitude impact of that is greater than 25% because they're now spending 100% of their time talking about PH-ILD. And so really, I think it was just a recognition.
The reason we did it was just a recognition by us that we needed to provide more support, there was more opportunity out there that we maybe weren't optimizing. I think we felt like maybe the sales representatives were spread a little thin. So while they were reaching all the prescribers, the frequency by which they were able to talk to them and educate them wasn't where we thought it needed to be.
So that expansion on the sales force started the middle of last year. You have to go through the hiring process, the training. So really, they deployed in earnest first of this year. And so it'll probably take a couple of quarters, really, I think, to start to see traction and the benefit of that. So as we get to the second half of the year, we would expect to see the payoff from that investment.
Perfect. And the company does typically highlight seasonality in the fourth quarter and first quarter, at least relative to Q2, Q3. But obviously, in the last quarter, we did see quarter-over-quarter growth in Tyvaso specifically. Did this kind of buck the trend, or is there underlying seasonality still in Tyvaso, or what was sort of behind that growth?
Yeah. So there's a natural seasonality to our business. We talked about this on prior calls. It's really a function of when you look at least when you look at the revenue line because we have two specialty pharmacies, right? So it's a closed channel, really two customers. They have an algorithm for which they determine how much they're going to order that's tied predominantly to shipping days of the quarter.
So when you get into the fourth quarter, you really lose 2-3 weeks with the holidays in terms of shipping days. On the physician-patient side, there's also fewer clinic days, so fewer days for physicians to see the patients. And then we see this phenomenon often, typically between Thanksgiving and Christmas, where just because of the complex nature of our therapies, patients will often wait till after the first of the year.
So we may have referrals and prescriptions coming in. The starts may not occur till after the first of the year. And so that happens really across all we see that to varying degrees across all of our products. And so we saw that in Q4 on a relative basis. But particularly with Tyvaso, we were able to grow through it, right, just because of the volume that was coming through. Now, the interesting thing is we didn't see it the prior year when you're looking at the revenue line. If you look at the underlying drug product going out to patients, we actually grew through it last year too. The challenge we had last year, as you recall, is we had this inventory adjustment because we had the nebulizer. We launched DPI.
And so the specialty pharmacies were having to adjust their inventory levels, so draw down their nebulizer inventory while they were stocking up on the DPI side. And so when you look at the revenues last year, it looks a little wonky. It looks like we actually had a down quarter, but the underlying metrics were still really strong. And so we saw that, again, this year as well.
Perfect. And then maybe on the capacity with the DPI, is all of that now behind us? Nothing related to that. And then maybe if you can give a high-level update on the capacity expansion just in preparation for IPF and PPF successful.
Sure. Yeah. So the capacity issues that we were running into last year are behind us. MannKind, who's our partner and is manufacturing DPI for us, made some enhancements to their production line. So they're able to increase production in the middle part of last year. And then as we moved to the second half of the year, we were seeing the benefit of that. We're bringing online, actually this month, a kitting line down in North Carolina to kit this. So it's a high-speed kitting line because that had been sort of our last bottleneck to the extent there was one, is that we were using a third party, and they weren't moving as they were limited on how fast they could move. So now we've got a high-speed kitting line. So those issues are behind us.
And the specialty pharmacies are able to order reliably within their contractual limits. We're starting to build up a little bit of inventory ourselves. That'll just continue as we move into the balance of the year, not to mention MannKind's adding two high-speed filling lines. So that'll increase our capacity. When that comes online later this year, that'll increase our capacity to support up to 25,000 patients a year. Then as we think about IPF, just to kind of round that out, we have a new production facility that we broke ground on last year in North Carolina to further manufacture DPI. That will have a capacity for an additional 50,000 patients. That should come online right around the time that we launch into IPF.
Perfect. And maybe on the Tyvaso DPI uptake in the field, yesterday on our physician panel, the doctor indicated there's actually still quite a bit of use of the nebulized product, especially during maybe dose titration and getting patients up to speed. Maybe overall, can you just tell us where are people using the DPI? Are they conversions or new patients? And are you seeing the same level of use of nebulizer to DPI, or how is it fitting in?
Yeah. So if you look at our revenues the last few quarters and the last couple of quarters, I guess, where we've broken out DPI and nebulizer, I think it's roughly a 60-40 split in terms of DPI. And that's tracking well when we look at the patient-level data in terms of the mix of patients. I would say that new prescriptions coming in, new referrals coming in, are more along the lines of 70-30. So over time, you would expect we would expect that the revenue is going to reflect that. And I think it will. So in terms of where the DPI is coming from, initially, it was a lot of transitions of patients on nebulizer that wanted the benefit or the convenience of the DPI. That's largely played out at this point.
So patients that were on a maintenance dose of neb and wanted to transition to DPI have transitioned over. And so DPI now is really I think it's really kind of starting to solidify itself as sort of frontline prostacyclin therapy and PAH, and then obviously in PH-ILD, which we've talked about. So on the PAH side, those can be prostacyclin naive patients. We are also seeing some transitions from the orals. So selexipag, for instance, if patients aren't doing well, that might be the next stop depending on where the patient is and their disease progression.
Perfect. And then we do have an FDA decision coming up for Merck sotatercept later this month. Maybe if you could talk just a little bit about how you expect sotatercept to impact the PAH business, I guess just the landscape overall and then as it relates to your top line as well or any of the product usage?
Yeah. I think over the, I mean, the medium- to long-term, we don't really see it impacting our business in a material way. I mean, it's another therapy. They have very good clinical data. It's great for patients. I think as you look at, you peel back the onion or the covers and look at their data, where it was used, how it was used, I think the things that we were really encouraged about is that 70% of the patients were on a background prostacyclin like a Remodulin or an Orenitram.
So it does seem to suggest that those two products work well together. So the other thing I would say is it's not a cure. It's not a replacement for prostacyclin. I think patients are still going to need prostacyclin. Increasingly, polytherapy is becoming the norm in PAH.
You have the various pathways you cover with a PDE5 and ERA prostacyclin. This is a fourth pathway. So I think it's additive to the products that are out there. I don't really see it as being a replacement for any one product, including ours. And I think the nice thing for the patients and us from a financial standpoint is if the drug's working really well, then ostensibly, the patients are going to live longer. They're going to stay in our therapies longer. So that's kind of how we see it. It's another tool, the toolkit for the physicians to use. But long term, we don't really see it impacting our business.
Perfect. Obviously, I know there's some ongoing litigation with Liquidia. We're not going to ask specifically about those decisions. I guess how do you see Liquidia as a potential competitor? Is that factored into your business model at all? Maybe why is the DPI, even if Liquidia were to come to market, saying PAH could be the preferred agent?
Did you say why would Liquidia become the preferred agent or which one?
Yeah.
So I think Tyvaso we believe Tyvaso will continue to be the preferred agent for various reasons. I mean, the big one is that we've got two years of patient data, thousands of patients on the product. The satisfaction level is incredibly high, both by the physicians and by the patients. And so they have that experience with our product, which is incredibly helpful. I think we think the convenience of our device is a differentiator. Ours is one breath per session.
Theirs is two. Ours doesn't require cleaning. Theirs does. We don't have a max-labeled dose. And so we just think, all in all, the patients and the physicians are going to prefer our product. We think the other thing that's attractive about our device is ours is what's called a low-flow device. And so that means that it requires less patient effort to actually breathe the drug.
And then as a result of that property or that characteristic, the drug's actually getting deeper into the lungs than what you see with a high-flow device, which is what their device is. So we think, all in all, the totality of the characteristics of our device are going to be preferred by physicians and patients. And then on the payer side, we're in these discussions right now with payers and kind of working that out.
But I think we're feeling increasingly confident that there's not going to be a there's not going to be a preference there. It's going to be a level playing field. So it's really going to be up to the patient, the physician, and we feel confident about how we're going to do there.
Perfect. And then you mentioned earlier that Tyvaso in IPF and PPF. Yesterday on the panel again, the physicians were really impressed with the increased data. And sort of even in the placebo patients, when you give Tyvaso, you do see that recovery in FVC. I guess what in the data package has resonated best with physicians? And maybe what can you update us on the status of the IPF/PPF program?
Sure. Well, I think the main thing is the FVC improvement that we saw in the increased data. The physicians have been really excited about it. I mean, this trial has been enrolling incredibly fast. We were able to actually increase the sample size last year without sacrificing any of our timelines. So I think both trials now are. There's two trials. There's a U.S. trial. There's a rest of world trial. Both are sized at around 575 patients. And we expect complete enrollment this year in both trials. It's a 52-week study. So we'll get the last patient in towards the end of 2025 and then expect to have a readout soon thereafter.
Perfect. And can you talk a little bit about the addressable patient population in IPF/PPF? I guess where would the drug fit into this treatment paradigm?
Sure. So for IPF in the U.S., we see that as a patient population of about 100,000 patients. And in the Teton trials, patients can be on background therapy. So it'll be additive to the existing therapies that are out there. In PPF, we think it's roughly 60,000 patients in the U.S. So again, another unmet need where patients can benefit from Tyvaso. And then in the case of IPF, and I think we'll eventually do this in PPF, but IPF for sure, we designed that to support a European filing. So we would expect to file in Europe and launch there soon after getting FDA approval.
Perfect. Maybe jumping over to the oral prostacyclin side of the business. I know we've discussed previously how some of the Orenitram data maybe hasn't or kind of was impacted by COVID in terms of relaying that to physicians, which maybe didn't get the full impact of that dataset out to the market. I guess how is the Orenitram launching now? How big do you think this could get? And then we'll dive into ralinepag after that.
Yeah. So I mean, it's interesting with the Orenitram because if you look at the clinical data for all of our products, it's far and away our best data. I mean, you've got clinical worsening. You've got improvement in some of the risk factors that physicians look at for patients in PAH. You've got an indication of survival at a cost that's actually less expensive than selexipag. So the whole package there is the value prop for Orenitram, we think, is really high. I think the challenges that we see sometimes with Orenitram, it's titration's good and bad, right? I mean, it's good that you can titrate up. It's also a little bit more complicated to communicate to the patient. And then you have just the normal side effect things that happen with a prostacyclin.
So I think the word's getting out on the data. I think what we have seen or what we found is that I think the ideal place to use an Orenitram is after ralinepag. So that was the whole point behind the Expedite study. So these aren't ralinepag patients that are sitting on ralinepag for years and transitioning over, although we do have patients like that. But the idea with the Expedite study was to take a patient that you would otherwise start on an Orenitram, start them on ralinepag, get them up to a good dose over a period of weeks.
Some doctors have done it in days, but really, the study was to do it over a number of weeks, then be able to transition the patient over to a higher level dose of an Orenitram with fewer side effects. And so I think we're finding increasingly that doctors are using that protocol to start patients on Orenitram. So that's really starting to get traction. And I think that's why we're seeing continued growth on Orenitram, and that should continue.
Then you have ralinepag in clinical development. I guess how would this fit into the treatment paradigm as it is right now? Would this be sort of a direct swap for Orenitram? Obviously, we talked about dose titration just now and sort of some of the data you have in relation to Remodulin. But could all of that be essentially seen as also captured in ralinepag, or do you see it in a different setting?
I think it remains to be seen. I think we'll see what the trial bears out in terms of the efficacy, titration, how high you can get, and patient outcomes. I think we certainly see it as a direct competitor to selexipag, same class of drug, IP receptor agonist. With the once-daily dosing, we think that that's going to be an attractive option or alternative to selexipag. Then, like I said, depending on the data, we'll see how that competes with Orenitram. I mean, there are properties of prostacyclin that patients benefit from over an IP receptor agonist. I think regardless of how this plays out, there's always going to be a role for Orenitram.
Perfect. Maybe on the xenotransplantation side, the company's indicated that they're now in pivotal preclinical studies for the xenotransplantation therapy. Maybe just at a high-level progress on that side of things and what are sort of the pivotal preclinical studies that you need ahead of moving into the clinic?
I'll let my friend James answer a question. Thanks for sitting here.
Yep. Thank you. So overall, we are continuing to make very good progress. And as Dr. Leigh Peterson said on the last earnings call, we are in discussions with the FDA in terms of satisfying their request for data in baboon studies. And so we're progressing those final studies this year, continuing conversations with the FDA with a goal next year, Joe, early 2025, to get an IND approved for human clinical trials in xenotransplantation. So that's kind of the goal. And I think the progress has continued. And as an organization, we're very excited and feel we're doing what the FDA has asked at this point.
Perfect. As it relates to the xenotransplantation side of the business, can you remind us the current footprint that you do have in terms of facilities and maybe what spend was associated with the current footprint?
Sure. So what we announced a few weeks ago is we did a ribbon-cutting grand opening for a facility in Christiansburg, Virginia, that we will use for growing the pigs that will be used for human clinical trials. And what we've said publicly is that facility was about $75 million that we established. We finished construction. And we're starting to get ready again to play into the timelines of working with the FDA to start human clinical trials in early 2025. And that should be a good footprint for us to get to where we need. And then from there, we would expand into the commercial designated pathogen-free facilities.
That is one of the questions that we do get, is how large of an expansion you would need to do for commercial opportunities. I guess what is the company thinking in regards to that? How many facilities would you need? Maybe what are the major de-risking steps? Obviously, you mentioned the de-risking steps to get to where you're at right now. In order to turn on that additional investment, what would you want to see, I guess, in the clinic?
Yeah. Thank you. So what we've talked publicly about in terms of this area is we do want to initially start, and I'll talk about when, but with a commercial DPF facility, and we've targeted the range for a cost to be between $1 billion and $2 billion. And I think it'll settle out somewhere in between, and you can use an average of $1.5 billion.
What we are anticipating and planning to do is once we get an IND approved with the FDA, we will evaluate kind of the protocol there and start to understand how the clinical trial can roll out. What we will do at that point because it's going to take about 3 years to build a commercial-scale designated pathogen-free facility. But we want to make sure we're doing that in a very thoughtful, methodical way.
As the human clinical trial moves forward, we're understanding that process and then starting to construct the facility. We're going to do it in a way where we can watch the clinical trial, and we can start to spend the money because we won't downstroke a check day one for $1.5 billion on average. That'll happen in time. We want to be very thoughtful, methodical about how we spend the money and making sure that we understand the clinical trial and where it's going so that we can make sure at the end of that clinical trial, we're in a situation and a position to be able to supply transplantable organs to those in need.
Perfect. On the last quarterly update, the company did announce that the FDA has cleared the IND for the miroliver ELAP program. Maybe just overall, can you discuss the rationale for the Miromatrix acquisition, and what would an initial trial look like post this IND?
Sure. Yeah. So we actually did two acquisitions last year, Miromatrix and then Iviva. And really, the goal there, the objective there was really to kind of round out our organ programs. This gives us some more shots on goals. We had the xeno programs, what we've talked about. We have a regenerated lung program, and then we have an autologous lung program on a 3D-printed scaffold that we've been working on. So this gets us another shot on more shots on goal in the kidney and the liver. So that was really the rationale behind doing those. In terms of the miroliver ELAP trial, I think the important thing there is it's sort of the first bioengineered organ that's going into clinical trial.
I think as a product, it's probably a niche product, but it kind of starts the or continues our discussion with the FDA around what does clinical trial design look like for all of our programs. So that's really, I think, the more important thing to think about with the ELAP.
Perfect. And obviously, touch on those two acquisitions, discussed about investment in the facilities for the xenopipeline. Potentially, we'll have a lot of cash if you're meeting your goals over the next several years. I guess how does BD factor into that? Is BD a priority for the pipeline, and what would you be interested in?
Yep. So thank you. So just to remind maybe the audience, we do have a capital allocation kind of waterfall. And in order, the priorities for us continue to be research and development, which means we're investing in ourselves both in clinical trials as well as facilities. And the second capital allocation priority is business development. And there, we do dedicate time, dedicate resources to look at opportunities that we can bring into the organization to provide the highest and best use of capital.
We try and be very thoughtful, and we look at organizations that are synergistic to the strengths of UT and the United Therapeutics, so from manufacturing to sales, to clinical trials, and even as Michael just discussed, Joe, in manufactured organs. So it is something that we continue to look at. We just want to be very thoughtful about bringing something in and making sure we have the right resources to advance that forward. The areas could be cardiovascular, again, things where we have strength and knowledge, or rare lung disease. Again, as Michael talked about, getting into the organ manufacturing space to supplement and bring in new ideas and technologies that advance that overall program forward.
Perfect. Excellent. And with that, we are at time. So thank you all for joining us. And thank you, too.