Great. Thanks. I think we're going to get started here, but I'm Terence Flynn, the U.S. Biopharma Analyst at Morgan Stanley. Very pleased to be hosting United Therapeutics this afternoon. Today, from the company, we have James Edgemond, the company's Chief Financial Officer and Treasurer, and Harry Silver, the Investor Relations team. Thank you both so much for being here. Just before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, I'm going to turn it over to James, who's going to make some opening remarks, and then we'll get into questions. Thank you both so much for being here.
Great. Terence, thanks for having us. Thanks for having United Therapeutics and also Harry and I here at your health care conference. I just want to take a minute to remind everybody that Harry and I could be making some forward-looking statements, and we would encourage you to look at our most recent public filings regarding the risks and uncertainties regarding any statements we make. Terence, thanks for letting me take a moment. Before we begin the fireside chat, I want to take a moment to reiterate just how excited we were and excited we are when we announced the TETON-2 clinical trial results last week. In short, TETON-2 represents United Therapeutics' best pivotal clinical trial outcome to date and the most successful IPF pivotal clinical trial ever reported.
This is a landmark win for United Therapeutics, redefining our reach within a respiratory disease state, and most importantly, and potentially for patients with IPF. The results were truly remarkable. Nebulized TYVASO demonstrated superiority over placebo for the change in absolute FVC by 95.6 mm from baseline to week 52 in patients with IPF and had a p-value of less than 0.0001, so 0.0001. Another exciting point is that the FVC improvement was greater when TYVASO was used alongside standard-of-care therapies. As for secondary endpoints, statistically significant improvements relative to placebo were also observed in most secondary endpoints. For two that weren't, they still trended in favor of TYVASO. Really great results.
As a reminder, another point that's important, we have both FDA and EMA approval for orphan designation for nebulized TYVASO for treatment in IPF, which should ensure we have a long runway in IPF before competitive branded proportional therapies could be secured for approval in this indication. Additional TETON-2 study results will be presented later this month at the European Respiratory Society Congress in Amsterdam on September 28, and we plan to follow that with an encore presentation for investors soon thereafter. Terence, thanks for letting me take a minute. They're just significant clinical trial results, and I just wanted to, again, repeat what we had put forth in a detailed press release last week.
Great. Maybe we'll just segue into some of my TETON questions just for consistency. I think big picture, you know the other areas, just remind us of the scope of that program in terms of TETON because you mentioned TETON-2 in hand, but TETON- 1 is coming up here. Maybe just remind us of the kind of the design and scope of the whole TETON program, and then we'll come back to the Capella case.
Sure. I think, Harry, you want to answer the question?
Yes, absolutely. TETON is consisting of two programs, of course. Last week, we announced the TETON-2 results, which is looking at U.S. and Canada. We have TETON- 1, which is expected to read in the first half of next year, which focuses on the U.S. and Canada.
there any other differences in terms of, aside from geography, that you guys would highlight to folks? I know you previously presented some of the baseline characteristics across these studies, but anything else that you know we should be mindful of as we think about it? I think IPF is one area where there's always this question of extrapolation from one trial to another trial. How do you think about setting the stage for TETON- 1?
Yeah, absolutely. The baseline characteristics, as you said, they're mostly the same across the two. TETON- 2 is mostly Western developed markets, so there are a lot of similarities across the population. In terms of extrapolating, we're really encouraged by what we saw in TETON- 2 and optimistic that we could show an effect in TETON- 1 as well.
The other question that I think we've been getting recently is just, you know, you guys, I think, mentioned this in the press release, is just expediting the, you know, filing review timelines. Can you elaborate at all on how to think about that? I noticed some other companies have done files for approval on a single study, but it's about double the size of your study. Maybe just talk about opportunities to expedite anything on the filing or review side.
Yeah. To set the stage for the expectations, our original agreement with the FDA was that we would need TETON 2 and TETON- 1 to file an sNDA to expand the label for nebulized TYVASO to add IPF to that. We do plan to meet with the FDA later this year and explore ways to expedite the filing after we have the TETON- 1 data in hand. There are a lot of avenues to explore. We've talked about the STAR pilot program as one potential thing that we can look at to sort of speed up the process. We can assure you we're looking at all potential avenues to really expedite this and get this therapy to patients as soon as possible.
Okay. You guys will meet with the FDA later this year. Would you give us an update after that in terms of if there were any kind of material change to plan? How do you think about that?
Yeah, you know, historically, we haven't really gotten into the weeds on every conversation with the FDA. I can't really commit to anything like that right now.
Okay.
I think if it is significant, to Harry's point, we have ongoing dialogue with the FDA. We have a great relationship. To get into the weeds of day-to-day would be exhausting. I think if there are things, Terence, that are material, we certainly would share those. I think the regulatory team will do everything they can to expedite this. It's also a long game. We want to do the right thing and respect what discussions we've had with the FDA as well.
Okay. Understood. The other area where, again, I know you guys have provided some insights here, but maybe these have changed now that you have some data in hand, is just the commercial opportunity. Maybe you could just remind us of how to think about IPF here in the context of your current franchises, PAH and ILD, and also speak to kind of the commercial strategy.
Yeah. So what we've said, we're still saying the same, 100,000 patients in the U.S. with IPF. When you think about the two currently approved therapies, it's a multibillion-dollar market opportunity for us from a CAM perspective. When you start to think about the commercial strategy, Salesforce, we are in there, you know, data just came out last week. We are formulating our plans. The expectation is that we would have a dedicated IPF/ILD Salesforce. You know, we are seeing a lot of the similarities in call points between ILD and IPF, so we think we can kind of hit the ground running.
The goal, you'd basically expand your current ILD Salesforce beyond what you currently have to encompass IPF. That'd be.
Yeah, we more than likely would have a separate Salesforce.
Separate. Okay.
Yeah, it's a question we've gotten. When you think about a step function, this would be a case where we would invest in a new sales team. It's the expectation because of the size, the call points, etc.
Okay. Understood. Can you tell us anything in terms of footprint, theoretical footprint? Would that be about the same size as your current ILD Salesforce, or would it be?
I think it will be determined. If you kind of look at PAH, is what?
We're saying this is, you know, 100,000 patients. Could it be something like double? Could be. I think we need to really kind of look at the opportunity to scale the Salesforce. The other thing that's interesting, just in today, Terence, with some of the meetings, there's some ideas that 100,000 patients that we're talking about is low relative to the opportunity. I just think we need a little bit of time to really right-size it and make the right investment strategy. Michael Benkowitz certainly will be doing that with his sales leadership ahead of that.
Yeah, the 100,000, you mean just in terms of some of the latest maybe prevalence estimates that are coming out, or what would drive an upgrade to the 100,000?
I think that's a prevalence now, but I think it's just further analysis of the market when you think about the respiratory disease state. I think the important thing for us now is to focus on TETON- 1, and then when we get around that time, I think we can give you better visibility on what the opportunity, true opportunity, true Salesforce size would look like.
Okay. Anything you can comment yet in terms of treatment duration in IPF relative to PAH or ILD? I know that was always a question early in the ILD launch was your treatment duration you're seeing with TYVASO. I think now they're tracking pretty similarly if you look at PAH and ILD. Would your expectation be that the treatment duration in IPF would be markedly different than what you're currently seeing out there in the commercial setting for any reason?
I wouldn't expect it to be, no. I think it's too early to say.
Okay. Great. All right. Maybe, just, you know, pivoting over to capital allocation, you know, maybe you could speak to the accelerated share repurchase program where I know there have been questions about, you know, the scope of that. What are the plans now post the TETON data and how does that influence how you're thinking about capital allocation?
Yeah. Thank you. To go where you started, Terence, on August 1, we announced and initiated a $1 billion share repurchase program. That was based upon a couple of things. One, at that time, being shareholder feedback, which supported it, as well as a regular evaluation of our capital allocation strategies. As you talked about and we've talked about on several calls, the capital allocation strategy for us is still the same. It's still internal R&D, still our facilities is number one. Number two is corporate development, and number three is returning cash to shareholders.
At that time, given the strength of our commercial business, the robust balance sheet, the confidence in our upcoming catalyst—so remember, this was August 1st, so more than a month ago—and really a belief in our share price potential, we felt this was a good opportunity to not only implement the share repurchase program, but also an excellent opportunity to invest in ourselves. As this third item in our capital allocation strategy, we also wanted to send a signal that we felt we were a good investment in ourselves. Again, we've gotten very positive feedback over that time. The accelerated share repurchase that we put in place is still ongoing.
Great. How do you think about, I mean, business development, you know, broadly, you know, how is the opportunity set out there? How are you thinking about now, again, in light of your share price? Does that change anything at all in terms of how you think about opportunity set?
No. We continue to look at what we call corporate development opportunities, and we look at them often. We look at them amongst the junior-most leadership of the firm, including Dr. Rothblatt. The areas that we tend to focus on are things that we know and do well, so kind of rare lung disease, cardiopulmonary, and even oncology. What we try and do is look for opportunities that have good scientific validity and where we feel we can bring our strengths of United Therapeutics to bear. Things like clinical trial expertise, things like regulatory, things like manufacturing, our commercial team. Across the board, we want to look for opportunities that are good synergies to us. I also want to reiterate that we're really comfortable with our research and development platform, as an example, the TETON-2 readout.
We're not in a place where we feel we have the need or we need to rush out to find a new asset to bring into the organization. We feel very comfortable that we can produce really good shareholder value with our opportunity set. If we were to bring in a new opportunity, of course, we need to evaluate what we're doing and what would displace what we currently have. We haven't found anything that really does. I think the TETON-2 read in our clinical trials in idiopathic pulmonary fibrosis are a good example of why that's important. Again, we continue to look for opportunities. It's a third item in our capital allocation strategy, and we'll continue to do so.
Okay. One last one just on strategy is the, you know, I feel like I ask you this once a year, James, is just the, how to think about guidance. I know you're one of the companies that does not provide revenue guidance. I know you give some metrics on expenses, but where is the latest in terms of thoughts on revenue guidance?
Thank you for the question, which I was expecting. At this current moment, we're not anticipating giving any revenue guidance for the balance of 2025 or 2026. The one thing that we have reiterated is that we do expect double-digit revenue growth from our current commercial business. That on a going forward basis is where we do feel very comfortable, but no update to our current strategy and planning around forward guidance at this point.
Okay. Great. Maybe we'll pivot over to commercial now. Obviously, TYVASO and ILD has been a great growth driver for that franchise. Maybe just remind us as we look into the second half of 2025, how are you thinking about the key inputs into that continued growth from here?
Sure. Thank you. The growth drivers are still the same for us. We expect growth to come from uptake in PAH/ILD as well as TYVASO DPI, and we expect that over the long term. If you think about TYVASO DPI, for example, there's a couple of elements to why we have conviction in this TYVASO DPI growth. It's really convenient. It's ease of use and design of our device, really unlimited dosing potential in TYVASO DPI. There's no maximum dose. Prescriber and positive patient experience. Since launch, there's been very good receptivity and experience among patients. What we believe are no payer incentives at this point, Terence, to prefer an alternative product from a contracting perspective. For the balance of this year, PAH/ILD as well as TYVASO DPI continued growth.
Obviously, you know, there's the entry of a competitor in Yutrepia here. What are you guys hearing from the field in terms of your sales reps, in terms of where that product is being used or trialed? How do you think about that as you head into 2026?
Yeah. Thank you. What we've heard and continue to hear is that Liquidi is differentiating their product in areas of dosing, tolerability, particle deposition, and ease of use. As you and maybe many recall, on our most recent earnings call, we outlined and addressed all these points as to why and how we believe TYVASO DPI is best positioned to be the best inhaled prostacyclin. Just a couple of points to reiterate that we reiterated on our Q2 call. For TYVASO DPI, there is no maximum labeled dose. For TYVASO DPI, there's no tolerability—I'm sorry. TYVASO tolerability increases over time. When you think about the particle size, it's the optimum particle size allowing for deep deposition into the lungs. For the device, ease of use, convenience of one breath four times daily. There's no cleaning required for TYVASO DPI.
We believe that over the long term, Terence, TYVASO DPI's product profile is well positioned for continued growth.
Okay. The other one where I know we get questions on, and we just hosted Merck in the session before this, is the impact of WINREVAIR. They're obviously, you know, moving forward in terms of some of these earlier line settings now going to a, you know, potentially maybe patients that are on two background therapies instead of three background therapies. As you think about that cadence, maybe continuing into 2026, how do you think about any potential impact on the TYVASO franchise?
Yeah. I think that's largely anecdotal and not necessarily showing up in the data. We still continue to see cytotoxicity largely being used with background prostacyclin therapies. Even if it does move earlier into the treatment paradigm, it's a progressive deadly disease. At some point, patients are going to end up on one of our therapies. If cytotoxicity is helping them stay alive longer, that means they're going to be on our therapies for longer.
Can I add one thing, though, Terence? The other thing, polytherapy tends to be the norm. In addition to what Harry outlined, you see patients on multiple therapies, which is good if it makes the patient feel better and they continue to progress on the disease and they can get more therapies. To further Harry's point, polytherapy tends to be the treatment in this disease stage.
Is there, again, and this might be a better question for Michael, a big difference between patients that are on doublet background versus triple background in terms of if you look at line of therapy and you're looking at duration of therapy? Meaning, is duration a lot longer if you're treated earlier versus if you're treated later? Is there a big difference when you look at patients that are on two background versus three background, for example?
Yeah. I don't know the duration. I think generally speaking, though, when you look at the research, patients that are treated earlier and often tend to have better outcomes because specifically in PAH, it's a progressive deadly disease, and you can't reverse the damage that's been done by the disease state. What you find is early, upfront treatment is a benefit to the patients long term. Unless you know, Harry, I'm not sure on.
No, that's absolutely great.
On the duration aspect, though.
One last on the commercial side is just, you know, there's been a focus on formulary discussions as you go into 2026. You guys are probably in the midst of those now. Just any, I think you had, again, traded some, you know, price late last year to, you know, gain access ahead of Yutrepia to put yourself in a very good competitive position. Maybe just elaborate. Anything else as you think about 2026 and how those formulary conversations are going or positioning? Anything else you guys need to do on that front?
Yeah. Just as a reminder to your question, we proactively engaged going into 2025, in terms of some contracting. The real idea around it was really to position nebulized TYVASO and TYVASO DPI at parity with current and kind of future competitors potentially coming to market. For the most part, all of that contracting in 2026 has been pulled through. It really presents a new base to grow TYVASO going forward. At this point, we're not expecting any more contracting in 2025, and we'll have to see about it next year. I think it was an investment that Michael Benkowitz, as you mentioned, who's the President and COO that oversees and works with the sales and marketing team, made a good investment at that point. We'll have to see going forward.
Okay. No comments on 2026, though, at this point?
Okay. Got it. Okay. Maybe just broadly, the last section is just to go through the pipeline. I know the xenotransplant program has been the area that now has gained some momentum because you guys are moving into the clinic. As you think about this, maybe just walk us through the key milestones that we should be focused here on the forward, and then we'll dig in a little bit deeper on this.
Yeah. The next milestone for our UKidney, the study is called EXPAND. It's really the first in human, first transplant, first patient, which we do expect to occur shortly. Right now we're going through site selection, site prep, but we do expect that to occur shortly. Other milestones for the xeno program, we also recently received IND clearance for the thymokidney product. That's our second registration enabling study for a xeno organ and really, you know, supplements our multiple shots on goal approach.
When can we start to see some clinical data from you guys? I mean, is this the thing where every patient, there will be some disclosure, or do you want a certain number of patients before you disclose clinical data? How do you think about disclosure from these programs?
Yeah, good. We can't really commit to a disclosure strategy at this time. It's certainly not going to be like the previous emergency use INDs before, which were controlled by the hospitals, and they sort of managed their disclosures and the PR around those. You know, this is a clinical study, so we have to be more disciplined in our approach there.
Another one we get is just analogs for the commercial opportunity. I mean, how do you think about, you know, framing this? Is it, should we look at the number of transplants each year across these organs as the opportunity, or is it a subset of that? I mean, just how do you frame out that commercial opportunity in these different segments?
Yeah. As Martine has said before, our opportunity is only limited by our capacity to produce organs. There's 500,000 patients on dialysis that don't qualify for a kidney transplant. Either all of that or some portion of that is our opportunity, and this is a potential curative therapy. You start getting into the conversations about gene therapies, but again, we really are just limited by our supply.
Can you give us any insight in terms of when you guys have been making a lot of investments there, in terms of where that capacity stands for these programs at this point?
Yep. We have the Christiansburg facility in Virginia up and running, and then we are building two more, one in Minnesota and one in Houston, Texas. Each one of those has about 125 organ capacity per year. Once all of those are complete, we would expect roughly around 400 organs a year at that time. Historically, we've talked about this larger $1 billion - $2 billion large commercial-scale facility. We've come to realize there aren't much economies of scale with building a large facility like that. We do like the geographic dispersion of these multiple smaller-scale facilities, but we can certainly scale that up at any time to be able to meet the supply once approved.
These existing facilities can go beyond 125 organs per year is what you're saying?
Yeah.
Oh, go ahead.
It would be more, adding more of these similar-sized facilities in different geographies.
Okay. What we've learned, and Harry said this, is one large facility, if you were in the $1 billion- $2 billion range, and those are some of the numbers, Terence, you know, we've talked about earlier. What we found, as we continue to learn, like this is a first of its kind, is that we feel at this point it makes more sense to invest in these three facilities. In fact, I was just in Texas and Minnesota two weeks ago walking these construction sites. The teams and the trade are doing wonderful jobs on these. What we found is this could be an opportunity where we could maybe scale back our investment to a couple hundred million versus a billion. Understand the operational aspects of this. Look at geographic diversity of where these are.
Think about how we can make sure we're ready when approved, if approved, to be able to satisfy the market because there's a ramp of adoption as well. What we are learning is that we can build these facilities fairly quickly, and we're going to have the skills and expertise not only in UT , but also in general contractors in the trade to scale should we need to. You can look at geographic dispersion around the country even. It's kind of a process where we're learning, and I think we're getting better educated all the time under the leadership that's running these programs that we can be good stewards of financial capital, make the investments we need to get to the point to be able to satisfy the market, and if needed, really expand from there.
We're just ultimately trying to be good stewards, and be ready for the market opportunity.
Is the Virginia facility nearing completion? What are the steps in terms of FDA inspection, that kind of stuff?
Yeah. The facility in Christiansburg is operational right now. I don't know the type of inspection, but we've had the FDA at that site, and it's going very well. This is part of the learning. If you think about the scalability, it's an opportunity to do things where you continue to learn and invest in new facilities, learnings from these other facilities. Christiansburg is up and running. Yeah.
If you do get an approval, you could start shipping product, like, you know, pretty quickly out of that facility, and then the other facilities take some time.
Yeah. The plan would be that you want to get the facilities up to scale, get them operationally, induce the animals into the facility on a going forward basis. That's really the plan. Internally, the logistics and planning around that are extensive right now. It's new. You know, we're learning too.
Okay. I think that was all the topics I wanted to cover. I really appreciate the time today, guys, and looking forward to your likewise.
Great. Thank you, Terence. Appreciate it.