Earnings Call: Q4 2020

Feb 24, 2021

Good morning, and welcome to the United Therapeutics Corporation 4th Quarter 2020 Earnings Call. My name is Kenzie, and I will be your conference operator today. All participants will be in listen only mode until the question and answer portion of this earnings Call. I will now turn the conference over to Mr. Dewey Stegman, Head of Investor Relations at United Therapeutics. Good morning. It's my pleasure to welcome you to the United Therapeutics Corporation 4th Quarter 2020 Earnings Call. Accompanying me on today's call are Doctor. Martine Rothblatt, our Chairman and Chief Executive Officer Mr. Michael Binkowitz, Our President and Chief Operating Officer Mr. James Edgemond, our Chief Financial Officer and Treasurer and Doctor. Lee Peterson, Vice President of Product Development. Remarks today will include forward looking statements representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause Actual results to differ materially. Our latest SEC filings, including Form 10 ks and 10 Q, contain additional information on these risks and uncertainties. We assume no obligation to update these forward looking statements. Today's remarks may also include financial measures that were not prepared in The most directly comparable GAAP financial measures can be found at our earnings release available on our website at www dotunither.com. Today's remarks 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 Doctor. Rothai for an overview of the Q4 and full year 2020 financial results and business activities of United Therapeutics. Doctor. Rothai? Thank you, Dewey. Good morning, everyone. Welcome to the 2020 full year and Q4 earnings call of United Therapeutics. We are going to have a really great call today. UT is a pulmonary hypertension company now becoming both a pulmonary hypertension and We expect our products for these two markets to generate double digit growth for several years For example, today we report that our Q4 2020 revenues grew by double digits, About 24% from Q4 2019 and even excluding a one time 2019 operation In the distributor order patterns, revenue still grew over 10% 4th quarter year over year with Tyvaso posting a 27% growth Q4 year over year and Orenitram Posting a UT record 30% growth. Let me now go into some detail on why we expect Strong growth in treprostinil patient counts to continue. Starting with our pulmonary hypertension activities, We believe organic growth from our existing 3 commercialized products as well as new products emerging from our pipeline will drive double digit growth. Organic growth from our 3 existing products includes, 1st of all, The increasing use of Remodulin as part of our RemUnity protocol to drive pulmonary artery pressures down below 40 millimeters of Before rapidly switching the patients for long term management on Orenitram. Several top pulmonary hypertension experts have recently that this kind of protocol is associated with much longer patient survival than the conventional approaches. 2nd of all, substantial organic growth is coming from Tyvaso based on data from our INCREASE pivotal trial that was published this past quarter in the New England Journal of Medicine. This kind of growth is visible in the 24 percent year to year financials mentioned above. And third of all, organic growth is also coming from Orenitram based on ever greater awareness of its ability to reduce mortality and morbidity based on data from our FREEDOM pivotal study. This is clear in the 30% growth rate from Q4 2019 to Q4 2020. Now we also expect growth to be driven by new products emerging from our pipeline. These for pulmonary hypertension include, 1st of all, our just launched RemUnity device secondly, our expected launch of our implantable Then just around the corner during 2022 to 2024, we expect to advance through late stage clinical development And launch for pulmonary hypertension. First of all, our Trevyent product optimized for dexterity challenged patients, which is in fact just awaiting resubmission to the FDA. 2nd of all, our once daily alternatives to UPTRAVI called Ralinepag. Thirdly, our once daily version of Orenitram. And fourthly, a pain reduced form of Remodulin called RemoPro. So all told, you add up the ones that are on the market and about to come, we have 10 parallel pathways to propel double digit growth in pulmonary hypertension, 3 on the market, 3 next up to the market And 4 in Q behind that. Now in addition to all of that, as mentioned at the beginning of the call, we have now built the bridge to evolve From just a pulmonary hypertension company to also being a pulmonary fibrosis company. This evolution was made possible by the beautiful results from our INCREASE trial reported in the New England Journal of Medicine that showed Tyvaso in ILD PH Also known as WHO Group 3 disease patients met all of its primary and all of its secondary endpoints in patients with pulmonary fibrosis induced pulmonary hypertension. This new indication Representing it's over 30,000 U. S. Patients, has no approved therapies And nearly all existing pulmonary hypertension treatments are in fact strongly contraindicated in it. It's funny for me to reflect on this, but roughly speaking, it is like pending FDA approval in April, which our fingers are all crossed on. It's like starting UT's revenue climb from the birth of the company all over again, but this time without competition from Actelion, Now our bridge in the pulmonary fibrosis is being even further strengthened with our Phase 3 TETON trial of Tyvaso in patients with pure pulmonary fibrosis that is no pulmonary hypertension. In this trial, we will test the hypothesis that Tyvaso is a disease modifying drug on top of existing pulmonary fibrosis treatments. That hypothesis, already indicated by bench top studies, received Strong confirmatory data in the INCREASE trial because the patients on Tyvaso had improved force Vital capacity outcomes or FVC as compared to just a reduced rate of decline in FVC seen in the conventionally treated group. Now this patient population, the pure pulmonary fibrosis patients Number is about 100,000 in the U. S. And are easily accessible since they are being treated already with either profanidone, also known as Some patients I mentioned before that we hope to get approval for in April and the TECON population, we hope to show success in by the end of next year, Numbering about 100,000 patients, there will be plenty of Tyvaso patients to drive double digit growth for several years to come. I should also add that we expect our approval of our Tyvaso DTI, I mentioned that earlier, to include a label not only for pulmonary hypertension patients, but very importantly also for pulmonary fibrosis patients. In summary, without even getting into our Phase III trial in COPD associated pulmonary hypertension or a registration trial for pulmonary hypertension gene therapy, UT's prospects have never looked better. With a total of 12 other vectors to double digit patient growth, some in pulmonary fibrosis, Some in pulmonary hypertension, some on the market, some soon to be launched, we feel very confident that the most important growth phase of United Therapeutics is just about to begin. I'd like to open up the lines for questions. We have a number of experts joining me on the phone. So if you ask me the question, I'll forward it either to Mike Benkowitz on all business questions, to To James Edgemond for all financial questions, to Doctor. Lee Peterson for scientific questions and to Dewey Steadman for any IP Thank you. Our first question comes from the line of Joseph Thome with Cowen and Company. Please go ahead. Your line is open. Hi Thank you for taking my question and congratulations on all the progress. I wanted to discuss the hopeful integration of the DPI a little bit. Can you give us your thoughts on how you expect to transition in or start patients on the DPI and PAH? And then for PHILD because the DPI could launch reasonably quickly after the formal label expansion, how are you thinking over the next The 18 months integrating PHLD patients on the DPI versus the nebulized Tyvaso version. Thank you. Yes. Thanks so much for those good questions. They're both really in the realm of business questions that Mike Benkowitz and his Very talented team, have already been working on and interacting with physicians on. So, Mike, could you take that question? Sure. I think the answer applies really I think to both indications. And we're really excited about The progress we've made with Tyvaso DPI, we're looking forward to the filing, as Martine said, in April. And with the priority review voucher We purchased at the end of last year, are hopeful that assuming everything goes well with the FDA, we'll be able to launch that into both indications by the end of this year. And I'll tell you that there's both in with PAH docs and with PAH ILD docs, There is a lot of excitement and enthusiasm around having a dry powder healer. And so We're preparing to aggressively launch that product and make it available to as many patients as are Wanting to either start initiating therapy on Tyvaso as well as transition over. And so I think at this point, we're Very encouraged by the feedback we're hearing from the physicians, very optimistic that there will be a, I think it will be a relatively speaking in PH, A quick transition for those patients that want to transition to DPI to be able to do so very soon after launch. Thanks, Mike. Operator, next question please. Our next question comes from the line of Liana Moussatos with Wedbush. Please go ahead. Your line is open. Thank you for taking my question. So for Remutinib launch, how should we think about Thanks, Liana. Nice to hear your voice this morning. Again, another business question. I'd like to forward that to Mike Benkowitz. Yes. So again, I think with the RemUnity launch, you're looking at I think another product where there's a lot of excitement in the market, as Martine said, we launched that earlier this month. We're pleased to see the really early enthusiasm from physicians around our immunity. We're already seeing referrals come in. So we Expect to get those patients on therapy in the coming weeks, months and into the future. We're not going to break out RemUnity versus the MS3 pump revenues. We'll We'll continue to try to report that as Remodulin revenues. But we certainly believe that with the immunity pump, We have an opportunity to continue to kind of maintain our Remodulin business over the long term and grow it by virtue of the immunity pump As well as the next iterations of that, the machine fill pump and as Martine talked about, the RemoPro, which is our pain free version of Remodulin. Thanks so much, Mike. I'm so excited about the immunity. Liana, I can't actually Hold myself back from sharing this anecdote that flowed in just the past couple of days ago. There's an important pulmonary hypertension center that had Regularly put patients on IV Remodulin, but was very resistant to putting patients on subcu Remodulin. They actually have become the 1st center to put patients on RemUnity. They were so impressed with the differences of RemUnity compared to Subcu Remodulin that this center that had not put patients on subcu Remodulin for a long time was now switching patients over or New patients on RemUnity, whereas they wouldn't have done that for subcu Remodulin. So I just think That anecdote is a very positive indicator of things to come for immunity. Operator, next question? Our next question comes from the line of Yun Wang with Jefferies. Please go ahead. Your line is open. Thank you. Questions on Tyvaso DPI. So once it's approved, you Double digit percentage of royalty to mankind. Are there any regulatory or And with that, do you expect the gross margin to kind of settle around mid to high 80s? Thank you. Okay. Thank you so much for the question. That sounds to me like pretty much of a financial question. So I'm going to ask our CFO, James Thank you, Martine, and good morning, Eun. You're right, we do owe Mankind royalties related to patients that use the DPI going forward. And as you probably recognize Noted in the financial statements, we had historically made milestone payments that we achieved these milestones under our agreement with MannKind. Going forward, There are limited milestones with respect to pursuing other indications. So our main Financial obligation, as you kind of referred to, is really around our royalty obligation for new patients to go into DPI. And as for Kind of your question around gross margin, you're getting very specific in terms of what it would be, I think, Overall, because we don't necessarily anticipate breaking out Tyvaso or DPI versus the current nebulizer. So when you're modeling, I think if you take the royalty obligations that we owe mankind, within your model, you're going to come out to Something based upon how you're splitting the revenue, but we don't anticipate doing that on a going forward basis. So thanks for your question and Martine back to you. Thank you so much, James. Appreciate it. Operator, could you please receive the next question? Our next question comes from the line of Jessica Tse with JPMorgan, please go ahead. Your line is open. My Questions on the Tyvaso PHILD launch. In the press release, how you kind of reiterated the Hope to double the number of Tyvaso patients in the near term. I think in the past you'd suggest you may be looking at about 18 months. When we think about that growth in patients, should we think of that as sort of straight line growth? Or is this something that could have an initial bolus or conversely something that might start slow and then sort of inflect over time? Thanks Jessica for your question. Nice hearing your voice this morning. That's very squarely a business question. So pass that one to Mike. Yes. Thanks, Jess. It's a great question. As we talked about when we did the increase call, investor call last month. I think our belief is that it probably won't be straight line. We do think that there may be an initial I can't really quantify what that is right now because I think we're still gathering that data through our interactions With our position, so there may be an initial bolus and then it may could dip a little bit and then Start to ramp back up. I think my belief based on what we're hearing right now is I think it will be Thinking about a big picture, a little bit slower than ramping up over the next 18 month period of time. And it's really just a function of getting the patients in, getting Spring, getting an echo done, getting a light heart cath. And I think there's still some but there's scheduling, there's logistics and all of that stuff has And then you have to get the referrals and get patients initiated on therapy. So that's really the reason for that. It has nothing to do, I think, with Lack of awareness or lack of enthusiasm for tibasumim indication, as we talked about last month, there's certainly a lot of excitement Thank you about being able to add this to the treatment armamentarium for pulmonary hypertension and ILD. Thanks so much, Mike. Operator, next question please. The next question comes from the line of Marty Oster with Credit Suisse. Please go ahead. Your line is open. Thanks, Martine. I think this one is going to fall into the business question category as well. But I just wanted to check-in with Mike. TAVAYSO had some nice growth this year and obviously there's a lot of awareness and interest in the group 3 PHILV indication that we're all hoping for Approval on the PDUFA date coming up in April. Curious if you can maybe talk a little bit about, did you see any sort of increasing in terms of the The prescribers of TIVASA this year, were you just seeing kind of a little like kind of better depth and uptake of existing base? Just curious if you could kind of comment as we're trying to think about How much kind of how much of that growth is reflecting somatorentinib for the broad indication? Thanks. Thanks, Marty. Great hearing your voice again today as well. You guessed it, Mike? I haven't earned my paycheck today. That was great. Yes. So it's a little bit difficult to know The extent to which there is off label use as a result of the increased data. All that we're able to track Is the is who's writing the referrals. So to your point about the prescriber base, that hasn't changed. The folks that are writing Tyvaso Our typical PAH prescribers, we have not seen a material change in that. We haven't seen really an taken in new prescribers yet. We do expect that that's going to occur after we get the label expansion. Yes. So within that prescriber base, our usual prescriber base, to the extent that they're seeing ILD patients, they could be riding through the indication. But by and large, the performance of Tyvaso is within our traditional PAH docs. I think a lot of it has to do with The buzz around Tyvaso, the New England Journal, and I think it's just on the PAH side, just reminding physicians of what a great drug that is for PAH patients. Awesome. Thanks, Mike. Thank you, Marty. Operator, next question please. Our next question comes from the line of Taj Singh with Oppenheimer. Please go ahead. Your line is open. Great. Thank you for the question. This is a financial question. In 2020, you had a dip in your sales from losing at circa. James, I know you always talk about OpEx spend as being 50% of previous year sales. However, in 2021, you're going to have potential launches, a lot of things going on. Just how to think about that and then going forward also? Thank you for the question. Thanks Hartaj. Great hearing you online today. Hopefully, Winners is not treating you too bad there in New York. And James, Solid financial question. Yes. Thank you, Martine. Good morning, Hartaj. And it is always good to hear your voice, but thanks for the question. So the budget That we have talked about historically and that you referred to this morning where we plan our budget in a current year, For example, 2021 based upon 50% of prior year revenues in total. So to your point around the decrease In sales, if you use Edzerp HeadCirca as an example, overall, we still need To maintain our budgets and our financial discipline with respect to our total revenues. So as revenues Grow going forward, that means unitarians in terms of their budgets will get additional funds for projects. With respect to your specific question on 2021, we still need to stay within our budget algorithm. With all the activity that Martine and Michael talked about In terms of product launches and clinical development, we still need to make sure we stay within that budget algorithm. So our 2021 budgets are based upon 2020 revenues, And that's how we built them and that's how we'll execute across the course of 2021. And all unitarians know that In order to get more and additional budget dollars, we need to all grow revenue across the firm. And that's what Martine talked about, double digit growth going forward. And that really is objectives Across United Therapeutics. So thanks for your question Hartaj. And Martijn, back to you. Thanks, James, for a great answer. And It's really beautiful hearing you describe the budget algorithm because the vision that I have in my head is that we have not 100 People rowing to grow the business of the company like just the sales marketing force, but we have 1,000, the total headcount at United Therapeutics All rowing in the same direction, the product development, the research and development, legal, financial, everybody is focused on a singular goal Of growing the company so that everybody there, everybody in the company can have additional resources available To grow the projects that are nearest and dearest and center to their own career development experience. So that budget algorithm has had an Excellent effect of kind of magnetically aligning all a 1,000 Unitarians in the same positive direction. Thanks for bringing up that question. Operator, next question please. Our next Question comes from the line of Terence Flynn with Goldman Sachs. Please go ahead. Your line is open. Hi, good morning. Thanks for taking the questions. Maybe 2 for me. Martine, you talked about double digit revenue growth. Just wondering, that I think for 2021, but how sustainable is that longer term? And then on ralinepag, another important late stage program for you guys, maybe any update on enrollment there and the potential timing of the data? Thank you. Sure. Thanks. I'm going to answer the first question, which is kind of, I guess, more of like And then I'm going to pass it to Doctor. Peterson to answer the scientific question relating to Ralinepag. So, as to the durability of our revenue growth, I think it looks really strong. And that was the reason I wanted to kind of highlight in the introductory remarks that We're not talking about growing within kind of a single small finite crowded pond, which is a bit how I would describe Group 1 pulmonary hypertension, about 10 Approved drugs, roughly speaking, 50,000 U. S. Patients. We are going to grow in that Group 1 pulmonary hypertension, but the durability of our growth throughout the 2020s It doesn't depend just on Group 1 pulmonary hypertension. You then on top of that have this Group 3 community, Which is one of their feet are in pulmonary fibrosis, which is the cause of their disease and the other of their feet Is in pulmonary hypertension, which we know very well. And now we are We've done the necessary pivotal trial, executed to a level of scientific rigor And confident that it enjoyed publication in the New England Journal of Medicine and hopefully to be approved in April. Now with that launch, we will go into a patient population of approximately 30,000 patients, who are almost all already being Treated for their pulmonary fibrosis, but virtually none of them are being treated for their pulmonary hypertension because there was no drug approved to treat that. And that's why I mentioned at the beginning of the call, this is to me like kind of a very beautiful scenario. It's like when we started the company a decade or 2 ago, there were maybe 20,000 pulmonary hypertension patients And we were competing with Glaxo on the parenteral side. We're competing with, Heptillion On the oral side, we were competing with another drug called iloprost On the inhaled side, and those actually fragmented and then we had 10 different competitors as we do today, but still And hopefully, knock on wood, we will get approved in April and then we have an awesome therapy for them in Tyvaso. And then Mike, just a year later, absolutely revolutionary therapy with the Tyvaso DPI product. So I think that's going to drive growth for well beyond 2021, in fact, for several years. And then One more thing, which I mentioned in the introductory remarks, is this pure pulmonary fibrosis This population of 100,000 patients in the U. S, all being managed with a drug which Fortunately reduces the rate of decline in their forced vital capacity, but does not improve it, does not modify the disease. And we've got this very promising data from the INCREASE study that builds Upon earlier bench top data that shows actually there is disease modifying capability in Tyvaso for patients with pulmonary fibrosis, We need to now validate that hypothesis with a prospective study, which is what our TETON That is currently enrolling. So you add up the Group 1, the Group 3, the pulmonary fibrosis, not to mention the PERFECT study. And I think this growing our patients by double digit rates is something that can be reasonably anticipated for the balance of the 2020. So with that answer to your business question or strategic question, let me shift over to Doctor. Peterson to address the scientific question. Yes. So basically, you were asking about the ralinepag studies. And in spite of The pandemic, the enrollment in those studies, especially the outcome study is going quite well. We still have a few sites that are open due to the pandemic, but of those sites, the majority of the sites are open and again, they're enrolling quite well. This is the outcome study is an international trial. So we have sites All over the world and we have pretty we have good enrollment both in the U. S. As well as outside of the U. S. We're still planning to have this outcome study enrolled in 2022 And then have a readout in 2024. Now remember this study is endpoint driven, hence the name outcome study. And so not only do we have the need to have the patients enrolled, but we need to follow them and collect data on the disease progression of these patients and then compare that in the two groups. So Expense of 2024 readout and a 2025 launch. We're also enrolling our CPET study. Now that study isn't endpoint driven. It's a change in peak VO2 from baseline to week 28. And we'll be enrolling 193 patients in that study and that allows for Dropouts. And so if we don't have as many dropouts as maybe we put into the initial calculations, we could finish that trial sooner. But we're counting on them both to be finishing around the same time at this point. We'll know more as enrollment progressions and the sites continue do open up. Thank you so much, Doctor. Peterson. Operator, we have time for one last question. We have no telephone questions in queue at this time. Okay. Thank you so much. Well, everybody, I would We'd like to express our appreciation for your participating in this quarterly earnings call covering the Q4 2020 full year 2020. As promised at the beginning, it's going it was going to be a really great call and it was. We had so many good questions And it's been the pleasure of Mike Benkowitz, James Edgemond, Dewey and Doctor. Peterson and myself to join you this morning. Have a great day. Thank you for participating in today's United Therapeutics Corporation Conference Call. A rebroadcast We'll be available for replay for 1 week by dialing 1-eight fifty five-eight fifty nine-two thousand and fifty with international callers dialing 1-four zero four-five thirty seven-three thousand four hundred and six and using access code 8,999,095.