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United Therapeutics (NASDAQ:UTHR)

Q1 2013 Earnings Call

April 25, 2013 9:00 am ET

Executives

Martine A. Rothblatt - Founder, Chairman and Chief Executive Officer

Roger A. Jeffs - President, Chief Operating Officer and Director

Andrew Fisher

John M. Ferrari - Chief Financial Officer, Principal Accounting Officer and Treasurer

Analysts

Salim Syed - ISI Group Inc., Research Division

Philip Nadeau - Cowen and Company, LLC, Research Division

Andrew Goldsmith

Richard Lau - Wedbush Securities Inc., Research Division

Joseph P. Schwartz - Leerink Swann LLC, Research Division

Operator

Good morning. My name is Sayeed, and I will be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation First Quarter 2013 Earnings Conference Call. [Operator Instructions]

Remarks today concerning United Therapeutics will include forward-looking statements, which represent United Therapeutics' expectations or beliefs regarding future events based on current assumptions. United Therapeutics cautions that such statements involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements.

Consequently, all such forward-looking statements are qualified by the cautionary language and risk factors set forth in United Therapeutics' periodic and other reports filed with the SEC. There can be no assurance that actual results, events or developments referenced in such forward-looking statements will occur or be realized. United Therapeutics assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting such forward-looking statements.

Thank you. And now Dr. Rothblatt, you may begin your conference.

Martine A. Rothblatt

Good morning, everyone. Welcome to the United Therapeutics First Quarter 2013 Financial Results Conference Call. I'm joined on the call this morning by my colleagues, Dr. Roger Jeffs, President and Chief Operating Officer of the company; Mr. John Ferrari, Chief Financial Officer of the company; and Mr. Andrew Fisher, Chief Strategy Officer of the company. I'll provide a few brief opening remarks and then open up the lines to any questions.

I'm pleased that our first quarter 2013 results were solid, providing a strong foundation for continued growth. Our pipeline continues to grow with 2 Phase III trials, a new Phase I trial of mesenchymal stem cells in PAH patients and advances in our strategic product portfolio.

Some particular high points that I'd like to bring to everybody's attention are that the revenues for the quarter have grown from $204 million during the matching quarter last year up to $245 million this quarter. I think particularly striking are that the sales of Tyvaso have grown 35% from the matching quarter, very much closing the gap between Tyvaso and Remodulin sales at $114 million and pretty much harkening the point where we now have 2 lead products more or less neck and neck in terms of being primary contributors to the company's revenues, Tyvaso and Remodulin.

Taking a look at the trend lines, we continue to believe that Tyvaso sales will end up surpassing Remodulin sales in the very near future to become the company's primary product.

With regard to Adcirca, it's striking that sales increased 51% from the matching quarter previously, and now clear and away, the most prescribed medicine in the United States for pulmonary arterial hypertension.

Our pipeline has never been stronger with 2 Phase III trials, the FREEDOM EV trial of oral treprostinil in combination with other therapy, a time-to-clinical worsening endpoint. That's the trial being conducted in numerous countries throughout the world, of course, the U.S., Europe, China and other major markets around the world, and will be our largest trial ever of any therapy for pulmonary hypertension. The second Phase III trial is our B trial. That's beraprost extended release in addition to Tyvaso, also a time-to-clinical worsening endpoint. That trial is being conducted in the United States.

We also have a GD2 [ph] at the Phase I line in addition to the mesenchymal stem cell study in PAH. Our first antiviral result of our special partnership with Oxford University will begin testing in dengue disease later this year. All expenses associated with that trial are paid for by the U.S. Government pursuant to our grant from the National Institute of Health. I'd also like to remind everybody that beyond Phase III, we have a study, which is being wrapped up, a compatibility -- a biocompatibility study for our Monoclonal Antibody 14.18 against neuroblastoma, which was licensed to us by the National Cancer Institute and is being prepared for regulatory approval in both the U.S. and overseas.

Finally, with regard to the advancements in our strategic product portfolio, that strategic product portfolio revolves around our TransCon platform of providing a once-daily, pain-free, quick injection, like an insulin-like quick injection, of a special conjugated form of both treprostinil and, separately, beraprost to provide 0 order release of those potent prostacyclin analogues over a 24-hour period. We believe that, that TransCon portfolio represents the ultimate future of prostacyclin therapy for pulmonary hypertension, providing 0 order release of a true prostacyclin analogue with a simple delivery and, therefore, represents a multi-billion revenue potential for us as we move into the 2020s.

So with those introductory remarks, I'd now like to open up the phone lines to any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Michael Yee from RBC Capital Markets.

Unknown Analyst

This is John on behalf of Michael Yee. Could you just provide us an update on the timeline and just more detail on the implantable pump? What data will we get this year exactly? And just remind us on the study design.

Martine A. Rothblatt

Sure, John. Let me give you a couple of kind of 30,000-foot views on the timeline, and then I'm going to give it to Roger to walk you through the details of the study design. He's more adept at that information than I am. Basically, it's truly a safety study, not an efficacy study. And the -- so there is a statistically calculated number of patients' days of exposure until you reach the necessary number to demonstrate safety. Originally, those calculations assumed a certain dropout rate from the study and were originally thought to be in the October, November time frame. However, the dropouts have been much less than expected in that study. And currently, we're believing that we will reach the necessary number of 75 patient years' worth of exposure in the late July time frame of 2013. From that point in time, there is a necessary process to go through with our partner, Medtronic. As you know, the implantable pump is a Medtronic product. And the catheter, the unique catheter that's associated those is a Medtronic product. The unique syringe to fill the catheter is a Medtronic product. So all the regulatory filings will have to be done by Medtronic, just like sort of a trivial filing by us. So we're going to pretty much have to march to their regulatory processes and timeline. I will look on to 2015 as the year for product introduction of the implantable form of Remodulin, assuming that a regulatory filing could get in by sometime in 2014 and that the FDA would have something [ph] out in something like the 6-month time frame. Roger, can you tell us exactly what is the trial's parameters?

Roger A. Jeffs

Sure. Yes, sure, Martine. So this is a very exciting study that we enrolled 60 patients at 10 sites in the U.S. And as Martine has said earlier, that we expect to enroll at the accrued safety data sometime in Q3 of this year. Basically, what we're looking to achieve is 60 patients followed for one year or 60 patient years of exposure, and that's what predicts the August or September completion of that safety data. As Martine also said, there's 2 components of the filing. Medtronic will file a PMA, seeking clearance to use the Synchromed II with Remodulin. And in tandem, we will take the label supplement to describe the characteristics of the Synchromed infusion in our Remodulin label. To be respectful of both of those requirements, Medtronic had some things that they needed to do to significantly have all of the NDA enabling studies for the PMA, and then we have things that we need to do to complete our NDA supplement. So as Martine said, to do all of that, both from the Medtronic stand -- side of the fence and from our side of the fence, that would predict a 2015 approval.

Martine A. Rothblatt

Thanks, Roger. And thank you for correcting me, just so the transcript is clear. So it's 60 patient years, not 75 patient years. Thanks.

Operator

Our next question comes from Mark Schoenebaum from ISI Group.

Salim Syed - ISI Group Inc., Research Division

This is Salim on behalf of Mark. Actually, this question is for you or Andy, I presume. On the Markman, could you remind us of the date specifically? I was looking at the public doc. I don't think it's listed there. And then also, is there anything in particular we should be looking for when we see the -- when we get the, I guess, the Markman results or the -- any particular terms that you think are more important than others that we should be looking out for?

Martine A. Rothblatt

Andy is comprehensively responsible for the Sandoz matter. So let's let Andy talk about that.

Andrew Fisher

Sure. Thanks for the question, Salim. So yes, Markman hearing in the first phase is next month. I believe it's May 20 to be specific. The -- in terms of trying to qualitatively assess the potential outcomes of the hearing, I'd prefer to stay away from that just because it's a litigation matter. But there, yes, of course there are claims being construed. I know oftentimes, from an investor perspective, there's a question about cases turning on Markman hearings. This is a very complex case with a number of patents at issue and, obviously, many claims within each of those patents. So I'm not sure this particular Markman hearing fits that mold that I just mentioned. So once the Markman hearing has occurred and the outcome is known, we'll obviously be able to discuss it and walk you through whatever the outcome is. But, again, it's fairly straightforward. And that also just brings up the point that this is a Markman that is just for the first complaint that was filed. As we previously disclosed, there's a second pending lawsuit related to Sandoz's subsequent amendment of the original ANDA filing to add the 3 additional concentrations of Remodulin to their filing. But that case is proceeding on a separate calendar currently. And at present, we're working on agreeing upon a scheduling order with Sandoz and the court. And at present, that would also call for a separate Markman hearing for the second lawsuit, which would take place down the road.

Martine A. Rothblatt

Super. Thanks, Andy, so much.

Operator

Our next question comes from Phil Nadeau from Cowen and Company.

Philip Nadeau - Cowen and Company, LLC, Research Division

Martine, I was wondering if you could talk a little bit more about the beraprost Phase II trial. Give us more details on the design there, and also talk commercially about where you think that could fit into your current portfolio. What unmet medical need does it fill?

Martine A. Rothblatt

Yes. I probably -- I'm just going to give you some broad outlines. We just got the FDA clearance on the trial design a couple of weeks ago. But it pretty much is a normal and customary, nowadays, time-to-clinical worsening protocol similar to Macitentan, selexipag, FREEDOM EV. Basically, the new standard for PH clinical trial designs. The unmet medical need that it serves, most probably in my mind, is I am really happy that Tyvaso is growing so rapidly. And as mentioned in my introductory remarks, it's essentially our primary product now, as it's in the shadows of eclipsing Remodulin for the top revenue spot. However, I'm troubled by the fact that the patients' duration on that therapy, while it has increased significantly from when we launched, it's right now on average about 18 months. And that's not as long as I would like. I would like to see patients stay on that therapy quite a bit longer. When we've gone ahead and carefully understood the whys and wherefores associated with this, the one thing which is -- which stands out is that the Tyvaso is unsurpassable in terms of being a pulmonary selective vasodilator and delivering the drug on target right there where it's needed. However, the beauty of Tyvaso compared to, say -- compared to Ventavis is also somewhat of a pharmacodynamic shortcoming in that a patient cannot -- does not have to take Tyvaso more than 4x a day. I don't think, realistically, patients can really comply with an inhalation therapy more than 4x a day. Sadly, I think this is [Audio Gap] for the -- at least from the market research data that we get, that the mean duration on Ventavis is only 6 or 7 months because that drug being less of a pulmonary selective vasodilator than Tyvaso, patients need to take it 6, 8 or more times a day. And nobody in real life can really -- I wouldn't say nobody, but just very few people in real life can comply with that. And as a result, the disease progresses more rapidly than when otherwise would be the case. So the beauty of taking one beraprost pill at the exact same time that you take one Tyvaso inhalation is it keeps compliance in sync. We found compliance with Tyvaso to be superior. And it's getting even better with our next-gen and even our third-gen Tyvaso inhalation devices, making it more and more portable, more and more pocketable. So the compliance with the 4x a day is great. The beauty of adding beraprost to that is then we're able to basically extend the duration of a prostacyclin analogue in the patient's bloodstream for a longer period of time than is the case if you just inhale Tyvaso 4x a day. So you begin to approach the 24-hour 0 order release type of delivery that you can, in general, only get from a parenteral therapy or, as I mentioned in my introductory remarks, our strategic product, which is the TransCon treprostinil. Now, of course, it might be in the patient's best interest to be on a parenteral therapy all the time but the fact of the matter is, that is by definition an invasive therapy. Patients resist going on Flolan or Remodulin until it's clear that they have exhausted all of the other options. So the unmet medical need here, to bring it full circle to your question, is there are 25,000 patients diagnosed. Despite all the best efforts of ourselves, Actelion, Gilead, Pfizer, Teva, these patients are still dying on average in about 5 to 7 years after diagnosis. And that's a pitiful and unfortunate situation. The -- more patients die from pulmonary hypertension having never had the benefit of prostacyclin than patients who die from pulmonary hypertension with prostacyclin. So our hope is that by combining beraprost extended release together with Tyvaso, we will be able to move the number of patients from prostacyclin therapy up from the roughly 8,000 that there are out today, up toward the 25,000 patients who could be benefiting from it and push survival with this condition up into the double-digit years. Next question please.

Operator

Our next question comes from Salveen Richter from Canaccord.

Andrew Goldsmith

This is Andrew Goldsmith on the line for Salveen. I was just curious if you could give us an update on the stock buyback program, the $420 million. Maybe how much was in 1Q or 2Q or any other color?

Martine A. Rothblatt

Yes. I'm going to ask John Ferrari, our Chief Financial Officer to comment on that.

John M. Ferrari

Our buyback program started in earnest in March. For the quarter, we only bought back about 99,000 shares. But as of Monday, we've bought back 700,000 shares and we spent about 10% of the program thus far.

Martine A. Rothblatt

Thanks, John. Next question?

Operator

And our next question comes from Richard Lau from Wedbush Securities.

Richard Lau - Wedbush Securities Inc., Research Division

Are you guys still on track to release the Phase I data for self-injectile treprostinil by year end? And also, maybe can you remind us about the trial design there?

Martine A. Rothblatt

Thanks. Can you repeat the first part of the question? Got kind of garbled.

Richard Lau - Wedbush Securities Inc., Research Division

I'm sorry, yes. Just are you still on track to release the Phase I data by year end for...

Martine A. Rothblatt

Phase I for the TransCon treprostinil?

Richard Lau - Wedbush Securities Inc., Research Division

Yes, yes.

Martine A. Rothblatt

Okay. So TransCon treprostinil is still in a preclinical stage of development, and our schedule is to commence Phase I studies next year, in 2014. We have -- I did mention in my introductory remarks that we've made some advances in that program. And what I would share with you is that the chemistry to combine the unique linker, which is able to achieve a nonenzymatic 24-hour release in bloodstream, to a prostacyclin analogue is novel, far from trivial and, in fact, has never been done before in scale-up quantities. We were really blessed here at UT that we have the best prostacyclin scientists in the world, and this team has successfully achieved a novel scale of synthesis of this 3-part molecule. And it was definitely the basis for patent filings, very novel. And that clears the way for us to produce adequate quantities needed for Phase I studies and expanded preclinical studies. Originally, the work that we thought would take about 1.5 years of chemistry, and there was no assurances that it would be able to be achieved, was, in fact, achieved in -- under 6 months with much better yields than anybody could have hoped for. So that was a major advance in that program. And given that our partner who we licensed it from had already demonstrated in small quantities of the drug that they were able to produce in a lab environment, the exciting results in nonhuman primates is close to [ph] investment program. We continue to be very, very excited and positive about this as basically the crown jewel of the strategic product portfolio. Next question.

Operator

Our next question comes from Natasha Asman [ph] from Sarah [ph].

Unknown Analyst

I wanted to ask about your program with regards to the PLX Phase I program. If you could give us some color on that. I know that you said that you have started the trial or plan to start the trial. If could give us some timeline, that will be great.

Martine A. Rothblatt

Thanks for the question on our neuroblastoma program. And -- oh, the Pluristem program, for the mesenchymal stem cells for pulmonary hypertension. Sorry about my misspeak there. Roger is now responsible for managing that program. It's part of our regenerative medicine group. And Roger, can you provide some answers there?

Roger A. Jeffs

Yes. Certainly, Martine. And thanks for the question, Natasha. It's a program we're tremendously excited about. We view it as a leap forward in next-generation type of therapy for patients with pulmonary hypertension, certainly novel and something never been tried before. So just as background, we licensed mesenchymal stem cells or what are also called placental-derived adherent stermal [ph] cells from Pluristem. We've been doing a lot of the IND enabling studies, toxicology and other things, throughout the year. And we're very pleased now to say that we have the IND for a Phase I trial, 9 patients approved, which will be conducted at a single center in Australia. It's a very simple first introduction of the PLX cells into patients with PAH and as such, will go with 3 escalating discohorts. So we'll start with a very minimal cell load. Once that's viewed as safe, we'll then go to the second level of cells and then, finally, to a third level of cells, which we've predicted based on all of our animal work. We've done some proof of concept studies in monocartiline [ph] and Sugin mice models, which are somewhat predictive models of pulmonary hypertension in neering models. And based on those results, we have predicted the weight-based application of cells for these patients. But again, we'll go very carefully since we haven't applied these cells to patients. It'll be an intravenous transfusion. And then we'll be looking for safety measures as well. It's a single-dose study. We will follow the patients, obviously, chronically, and we will look for measures of safety that include measures that would some -- someone would typically use for efficacy, including hemodynamics, 6-minute walk and other things, given that it's just a single dose, it's low dose. And we have yet to define the dose profile. We're not really looking for efficacy here, but we will peek, so to speak. But we're excited. We think the first patients will come in the following month or so. And then based on the potential outcome of that, we will then design Phase II dosing studies probably in the next year. But very exciting. There's a lot of buzz in the PH community about this next-gen program. And then certainly, the data that we have preclinically, we will begin to publish at major congresses, and I think that will amplify the excitement that we're currently seeing with the program for those in the know already. So that's the basics of the trial, again, just safety. I don't want to have any expectation that we're trying to show efficacy here, but just simply a safety study.

Operator

[Operator Instructions] Okay. We do have a question from Joseph Schwartz from Leerink Swann.

Joseph P. Schwartz - Leerink Swann LLC, Research Division

I was wondering if you could give us an update on the neuroblastoma program?

Martine A. Rothblatt

Thanks, Joseph. Excellent. And that's the question I was about to answer before, so I'm glad you did ask. I'm really excited about that program. It's run by one of the terrific scientists in our company, Dr. Mary Smith, who has long lineage in this area. She is ultimately managed by Dr. Jeffs. So Roger, if you could basically give everybody a briefing on where we are with the neuroblastoma regulatory approval process, U.S. and Europe.

Roger A. Jeffs

Sure. And great question, Joe. So just maybe a primer for those who aren't familiar with our neuroblastoma program. So we licensed from NCI a monoclonal antibody that bonds to what's [ph] called GD2 and the antibody is Ch 14.18. It bonds with [ph] neuroblastoma cells. And for those who don't know, neuroblastoma is a cancer of the peripheral nervous system. And it's responsible for about 12% of all deaths due to cancer in children under 15 years of age. 14.18 was demonstrated through work with COG and the NCI to prolong survival in the Phase III trial in patients with high-risk neuroblastoma and that data was published in the New England Journal in September 2010. The NCI has also completed an open label clinical trial in an additional 105 children to better define the safety and toxicity profile of C 14.18 immunotherapy in children. Following our license, our role in this now is we are developing the commercial manufacturing capability for the antibody in our Silver Spring facility, and we are also currently enrolling a human PK study with our -- what we'll call the UT manufactured product, in children. And we are close to enrolling that study. So once we complete all of the, basically, process validation batches from the scale-up as well as collected data for the human PK and look for comparability both in terms of genetics and other things, we will file the BLA. Our expectations for the filing are actually pretty near term. So in Europe, we plan to file by the end of the year. And in the U.S., we plan to file in the first quarter of 2015. So very exciting program. Certainly, the data is as robust as one would like at the survival endpoint. And then based on the high, high, high unmet medical need, we think it would be an extractive [ph] review. We certainly will seek that. So based on the filings, we will think a review completion by -- within a 6-month time frame or so would be predictive. So that's the update on that very exciting program, Martine.

Martine A. Rothblatt

Thank you, Roger. Thanks for the question. So to wrap up here, it has been, as of the beginning, a very good year and a very good quarter for United Therapeutics. The fundamental approved products, each of them continue to grow. Remodulin's growth continues to be organic within the United States, notwithstanding the fact that it is -- competes against epoprostenol, both generic and branded forms of it. We look for continued growth in Remodulin overseas as well. We now have approval to launch Remodulin in China. We expect within 1 to maybe 2 years at most to have approval to launch Remodulin in Japan. Just last year, we got approval to launch intravenous Remodulin in Europe. And this coming 12-month period, we should be able to wrap up most of the reimbursement authorizations we need to complete the rollout process for intravenous Remodulin in Europe. So we expect to see continued growth in that franchise. Tyvaso, as I mentioned, is now beginning lap Remodulin. And Adcirca is growing fastest of all. The pipeline has never been more active, with 2 Phase III trials and all the different post-Phase III and pre-Phase III work that Roger covered so wonderfully. So it's a great time to be here at United Therapeutics. Thank you for your calls, and we look forward to seeing you either at the upcoming health care conferences or pulmonary hypertension thoracic-type of meetings in the near future. Thank you. Operator, you can conclude the call.

Operator

Thank you for participating in today's United Therapeutics Corporation First Quarter 2013 Quarter Earnings Conference Call. This will be available for replay beginning at 11:30 a.m. Eastern today through 11:59 pm Eastern May 3, 2013. Conference ID number for the replay is 32040188. The number to dial in for the replay is (855) 859-2056 or (404) 537-3406. This concludes our program. You may all disconnect and have a wonderful day.

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