United Therapeutics' CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.25.14 | About: United Therapeutics (UTHR)

United Therapeutics Corporation (NASDAQ:UTHR)

Q4 2013 Earnings Conference Call

February 25, 2014 9:00 am ET

Executives

Martine A. Rothblatt - Chairman and Chief Executive Officer

Roger Jeffs - President and Chief Operating Officer

John M. Ferrari - Chief Financial Officer

Andrew Fisher - Chief Strategy Officer

Analysts

Salim Syed - ISI Group

Salveen Richter - Canaccord Genuity

Liana Moussatos - Wedbush Securities

Mohit Bansal - Deutsche Bank

Phil Nadeau - Cowen & Co.

Bret Holley - Guggenheim Securities

Carter Gould - JPMorgan

Matthew Kaplan - Ladenburg Thalmann

Operator

Good morning. My name is Kevin and I'll be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation Fourth Quarter and Annual 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Remarks today concerning United Therapeutics Corporation will include forward-looking statements, representing the Company's expectations or beliefs regarding future events. The Company cautions that such statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Please see the Company's latest forms 10-K and 10-Q and subsequent filings with the SEC for additional information on those risks and uncertainties. There can be no assurance that the actual results, events or developments referenced in these statements will occur or be realized. The Company assumes no obligation to update forward-looking statements to reflect the actual results, new information or changes in underlying assumptions.

Today's remarks are intended to educate investors about the Company. This may include reporting on the progress and results of clinical trials and other developments with respect to the Company's products. Today's remarks are not intended to promote the Company's products, to suggest that they are safe and effective for any use other than what is consistent with their FDA approved labelling. Once we provide all available information regarding the products, their risks or related clinical trial results, anyone seeking information regarding the use of one of the Company's products should consult the full prescribing information for the products available on the Company's website at www.unither.com. Thank you.

Dr. Rothblatt, you may begin the conference.

Martine A. Rothblatt

Thank you very much, operator, and good morning to everybody joining our 2013 annual financial results conference call which will also cover the fourth quarter 2013 results. I'm joined in the conference call today by our President and Chief Operating Officer, Dr. Roger Jeffs; by our Chief Financial Officer, Mr. John Ferrari; and by our Chief Strategy Officer, Mr. Andy Fisher, who is also especially good at answering questions relating to patents, IP and litigation. Just to give a brief introductory talk here and then open up the phones to questions and I'll be pleased to either answer them myself or to refer the questions to Roger, John or Andy as would be most appropriate.

So reflecting back on 2013, I think it's pretty indisputable that 2013 was the best year in United Therapeutics Corporate history. It was a year in which our revenues for the first time not only crossed $1 billion, which was our original forecast for this year, but in fact soared 10% above that. It's a year in which our annual non-GAAP earnings crossed over $0.5 billion, and that is certainly a sign of a well-operating company that can deliver non-GAAP earnings of over $0.5 billion on revenues of just over $1 billion.

If you're taking a look at the financial results, you'll notice that the GAAP earnings per share showed a loss for the year. However, this is simply an artefact of the accounting treatment for the share tracking awards which we issued to our employees in lieu of equity-based stock compensation or restricted shares. These types of share tracking awards are required by the accounting rules to be mark-to-market every quarter.

And continuing on the theme of this being our best year ever, in 2013 and in the fourth quarter in particular, our stock price soared to its highest level ever bringing our market cap to over $5 billion. So as a consequence of this very great news in terms of the growth in our stock price and our market cap, we are obligated by the accounting rules to mark-to-market the share tracking awards and that results in a inflated value for those awards and inflated expense and hence the GAAP loss whereas the actual Company's performance is best demonstrated in our opinion by the non-GAAP earnings of over $0.5 billion.

Now I certainly am aware of the adage that a company really cannot be evaluated based on what it's done in the past but how it's going forward that is most important, and while I can say, and I think without much room for disagreement, that 2013 was the best year ever for United Therapeutics, I'm equally confident in saying that 2014 would be an even better. Let me go through a few of the key points on supporting that.

2014 will be better even than 2013, first and foremost because 2014 is the year in which the Company has realized and will realize its original founding purpose. The purpose of United Therapeutics was to develop an oral or pill form of the important vessel active molecule, prostacyclin, which is present in all person's bodies and in fact a mammal or a person is not even viable without the prostacyclin gene being expressed in their body.

However, one of the most marked findings in terms of the differences in pulmonary hypertension patients from non-PH patients is that the PH patients have a marked reduction in the levels of prostacyclin and its metabolites in their blood stream. As a result, their pulmonary arteries are not as vasoactive of those of the rest of us and as a result their pulmonary arteries tend to suffer further in multiple operation and obstruction to blood flow [indiscernible] with the result of an increasingly enlarged right heart and ultimately right heart failure. So the beautiful thing about prostacyclin is that it prevents these negative things and hence most people don't have those symptoms.

Now it was realized very early on, around the late 80s or early 90s, that people who lacked appropriate levels of prostacyclin, especially pulmonary hypertension patients, could have those prostacyclin levels increased by giving them prostacyclin exogenously, in other words from outside their body. It was a Nobel Prize achievement to synthesize the prostacyclin molecule. It was done by John Vane, the founding chair of our SAB, and the problem though that immediately faced pharmacologists was that prostacyclin in the body has a half life of less than two minutes and the DNA is continually re-expressing signals to have more prostacyclin aid, and similarly pharmacologically when prostacyclin is for synthesized, it would last only for two minutes.

So our first product, Remodulin, continuously 24 hours a day infuses prostacyclin into the patient's body. Our second product, Tyvaso, tries to achieve a similar effect by having the patient breathe nine plus a day – nine plus at a time, four times a day our treprostinil prostacyclin analogue molecule. But the Holy Grail, the goal of our Company was to have a pill that a patient could take just two or three times a day and would give them the types of normal prostacyclin levels that non-PH patients have. We worked continuously at this goal for many, many years and thanks to the efforts of Dr. Roger Jeffs and his team, we were able to successfully achieve FDA approval in the fourth quarter of our oral form of prostacyclin treprostinil.

Now that was certainly a big part of what made 2013 the best year ever for us, but the reason why I believe 2014 will be even better is because 2014 is the year in which we will launch oral treprostinil under the trade name, Orenitram, to the pulmonary hypertension market in the United States. And I can certainly assure everybody on the phone that there is not a prescriber of medicines for pulmonary hypertension who have say more than 30 or 40 patients, in other words a significant treater of people with pulmonary hypertension, all of those physicians are very excited about the advent of Orenitram oral prostacyclin analogue called treprostinil that we will launch towards the middle of this year.

It is one of the signalled iconic developments in the history of pulmonary hypertension that has an oral ability to help increase the prostacyclin levels in people with pulmonary hypertension and that will become part of the prescribing reality in 2014, hugely positive fact in the history of our disease.

In addition, every indication, be it Remodulin, Tyvaso and Adcirca, will continue to increase their sales levels to new records in 2014. Already in the first couple of months of this year we are seeing growing sales of Remodulin, Tyvaso and Adcirca as compared to last year and all indications are that all three of these drugs will reach record revenue levels during 2014.

Another very, very exciting fact about 2014 is we will really come to what's sort of called the hump level or the peak enrolment rate in two different pivotal trials of new treatments for pulmonary hypertension, Orenitram in combination with PDE-5 and ETRA, and oral beraprost in combination with Tyvaso.

So as we enter into 2014, in summary I can say that while we have delivered strong results in 2013 reflecting growing demand for Remodulin, Tyvaso and Adcirca, all signs are that we will see higher levels of revenues and higher levels of patients using all three of these treatments in 2014. In addition, while during 2013 we successfully brought a fourth project, Orenitram, to FDA approval, in 2014 we will be able to launch that drug nationwide in one of the most significant developments yet to occur in pulmonary hypertension. Finally in 2014, we will continue enrolling patients in two pivotal trials demonstrating the strength of our pipeline for developing promising new therapies for pulmonary hypertension.

We entered this year with the largest market share of any product for the parenteral treatment of pulmonary hypertension with any type of prostacyclin or prostacyclin analogue, we entered 2014 with the largest share of any inhaled treatment for the treatment of pulmonary hypertension with our Tyvaso having approximately an 80% market share, and we entered 2014 with more patients with pulmonary hypertension taking our medicines than those of any other company, and in particular Adcirca is now used by well over half, I believe about 60% of all treated pulmonary hypertension patients are on Adcirca treatment in addition – many of them in addition to either our Tyvaso or Remodulin treatment.

So I'm sure you can hear how excited we all are about 2014, how proud we are of 2013, and with that introduction, operator, I'd like to open the lines for any questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Mark Schoenebaum with ISI Group.

Salim Syed - ISI Group

This is Salim in for Mark. Just had two questions. One on tax, so with all the discussion on tax these days, I was wondering if there was any discussion in UTHR about lowering your tax rate, and if not, what's the downside if not having that discussion? And then on patents, so the 393 process patent that you got last year and the 137 method patent that you just got last week, can you confirm that Sandoz has not certified on those patents yet?

Martine A. Rothblatt

Thanks Salim for all those questions, and I'm going to ask John Ferrari, our Chief Financial Officer, to address the tax question and then ask Andy Fisher, our Chief Strategy Officer, to address the patent question. John?

John M. Ferrari

Thanks Martine. We are always interested in reducing our tax rate. I think yesterday you saw a blip, was going up in part because of our share-based comp increase and some real correlation with [62] (ph) with the tax code, but historically for last several years, our tax rate has been at 30% or under 30% which for a pharmaceutical company is actually pretty good. So we're always taking steps to see if we can generate business credits and do things to keep in tax rate at a fair rate, around 30% or lower.

Martine A. Rothblatt

Thanks John. Andy, can you talk about the new patent?

Andrew Fisher

Sure. So yes, you have noted that last I think late summer we added that 393 patent for the Orange Book for Remodulin. It's actually listed for all three of our treprostinil based products. And then just last week we added another patent to the Orange Book for Remodulin, the 137 patent. As you'll read in our K, we actually have a related patent that's issued today and will also be looked at in the Orange Book for Remodulin. As of yet, Sandoz has not certified on any of those patents and we're not able to comment on the impact of the litigation if any as of yet. So all I can say on that is I guess stay tuned.

Martine A. Rothblatt

Thanks so much, Andy, and compliments Andy to you and your entire patent team and to Roger and his entire chemistry and chemistry R&D team which has wrapped up so much of these patents and selling patent positions. One thing which both of you who were not on the Orenitram launch call, that new product of ours is covered by I believe eight Orange Book patents going out to the end of the 2020. So not only is the Company's pipeline very bright but the other thing that's really, really exciting for us is that our IP protection is strong and goes out until 2020. Operator, can you please let the next person ask the question?

Operator

The next question comes from Salveen Richter with Canaccord.

Salveen Richter - Canaccord Genuity

I'm just wondering with over $1 billion in cash, just what your plans might be there for uses of cash, and then just maybe the status of your launch prep for Orenitram, where you stand and what are you doing ahead of launch here?

Martine A. Rothblatt

Thanks so much. Great two questions. So I will touch on the question about cash and strategies with regards to the use of the cash, and following that I would like to ask Dr. Roger Jeffs to address your question about early launch preparations for Orenitram.

So with regard to our cash, our position for using the cash is two-fold. First, we are constantly on the lookout for acquisition opportunities where we can strategically expand our footprint. These are in pulmonary life-threatening conditions where of course we are already very strong in pulmonary hypertension but we would like to expand into other pulmonary conditions given the large base of understanding that we have for that disease sector, or for other areas where we have a growing strength, and one of those is in orphan oncology.

And as you may be aware, we filed I believe last month or a little bit before that for the regulatory approval for our 14.18 MAb as a treatment for neuroblastoma in the European Union and we will be making a similar trialling for that biologic in the United States within the next couple of months or so.

So certainly before the end of this year, we are hopeful of our launching a product into the orphan oncology space and that is another area where we would be keen to use our cash to make a strategic acquisition that could build on our success in having successfully manufactured a biologic for the treatment of an orphan oncology condition, and hopefully crossing our fingers on successfully getting it approved in both Europe and the U.S.

The other use of our cash other than strategic acquisitions is to return a greater amount of value to our shareholders by engaging in share buyback and we are currently in the middle of a $400 plus million share buyback. This is not any kind of forecast or a promise or guidance but we expect that that will be completed this calendar year, and as we continue to accumulate more cash, such cash which is above what we need for strategic acquisitions, we would use for further buyback.

And just to give you a data point in terms of the probability of my statements on this, we have already with the numerous previous buybacks we've done, bought back just about 20% of our outstanding shares. So that's a pretty good scorecard in terms of our peers and I think strong evidence of our inclination to that direction. So with that answer to your question on the cash balance, I'd like to turn to Roger to give us all a briefing on the preparations for Orenitram launch.

Roger Jeffs

Sure Martine and thanks for the question. So we are in and all-systems-go preparatory period with regards to logistics for Orenitram's launch which we still anticipate by midyear. So in that regard just this week in fact we are manufacturing commercial batches, doing product labelling and packaging in our facility here in Research Triangle Park, a lot of effort in that regard. We are also developing our promotional and brand campaign and then training materials around that brand campaign so that we stay consistent with the labelling for the product.

And then finally another important logistical effort that the Company is doing under Jay Watson's leadership with strategic ops is building our patient portal or hub assist center that have had rave remarks for their assistance with patients, for patients with Tyvaso or Remodulin, and help build that infrastructure so that we are there to support patients as they come towards Orenitram therapy as a future therapeutic option for them. So really in a heavy logistical phase right now, lots of activity, lots of energy and excitement as we build into the midyear launch.

Martine A. Rothblatt

Thanks Roger, super answer. Great question. Operator, could you please open up the line for the next question?

Operator

The next question comes from Liana Moussatos of Wedbush Securities.

Liana Moussatos - Wedbush Securities

Congratulations on an outstanding year and can you give us a little bit more information on the pipeline product status like implantable pump and TransCon Tre self injectable?

Martine A. Rothblatt

Sure. Great questions, Liana. Thanks very much for the congratulations. So I will touch on a little bit of that and perhaps I'd like to ask Dr. Jeffs to comment about the TransCon product and I will talk a little bit about the implantable pump. So with regards to the implantable pump, this is Liana I think probably going to be looked back in maybe five or ten years' hindsight as one of the most revolutionary development in pharmaceutical delivery of any drug.

And by the way, 99% of the credit of this goes to Medtronic. Their SynchroMed II pump allows the pharmaceutical to be delivered continuously inside the body thereby avoiding the need for a puncture of the skin with the associated infection risk that goes along with that and the great inconvenience and awkwardness to patients having to walk around with both a pump and a catheter outside their body, day and night sleeping with it, bathing with it, you could just imagine the logistical nightmares.

So Medtronic's SynchroMed II pump has been used very successfully for example intrathecal delivery of drugs, and our partnership with Medtronic is the first opportunity to use this technology for continuous intravascular space delivery of the drug, in our case of course Remodulin or treprostinil.

So we are very honored to work with Medtronic on this and the first big step was to find out what the FDA expected in terms of regulatory approval and what they expected was a safety study. They did not require an efficacy study because Remodulin delivered by a Medtronic bump is no more or less of an intravenous Remodulin therapy than delivered by an outside of the body pump as we do it today. So no efficacy study was required, just the safety study.

That safety study was completed actually ahead of schedule last year led by the industry pulmonary hypertension medical field leader, [Dr. Robert Borsh] (ph) and demonstrated success in terms of its primary endpoints quite a bit better than the need that was called for in the study. So, tremendous success in terms of that endpoint. However, there is a lot of other secondary endpoints that have to be collected and analyzed and submitted to the FDA for Medtronic to have approval to use their SynchroMed II pump in intravascular space delivery of a drug as would be the case for Remodulin in pulmonary hypertension.

So they are currently in the process of collecting all of the secondary data points and related data points, everything geared to safety and analyzing that and preparing for submission to the FDA. I can't give you an exact date that we would launch the implantable pump product because that's a process that is really within Medtronic's control and we certainly completely agree and respect their need to proceed diligently with safety as the foremost consideration. So that process is moving forward. I feel very, very confident that it will be submitted to the FDA. I feel very, very confident that the data is so good that the FDA will end up with a favorable view of this.

The beneficiary, Liana, will be the patient. You may be aware of the statistic that half of all pulmonary hypertension patients who die, which is by the way upwards of 2,000 people a year, never have the opportunity to avail themselves of any prostacyclin treatment, not Remodulin, not Tyvaso and not those of our competitors. The reason for this, when we asked the doctors, why are these patients dying without ever getting prostacyclin, every single doctor says the same thing which is that, they cannot force this therapy upon a patient and patients who are towards the end of their life are resistant and reluctant to go on something so complicated as an outside-of-the-body pumping catheter system that has to be changed daily or every other day, medicines reconstituted and so on.

But all those doctors say, if you can bring implantable Remodulin to the market where we implant in the patient's abdomen and only every month or two months they report back to the doctor for a refill of the reservoir with some specially designed syringe that Medtronic has developed, they said this would be a game-changer for patients, patients who would resist going on Remodulin with an outside of the body pump, a great many of them would very definitely accept going on Remodulin with an implantable pump.

So I think it's going to be a game-changer for Remodulin, a game-changer in the field of pulmonary hypertension physicians and certainly a game-changer for the patient. I would love to give you some specific dates but we are not in control of the regulatory processes and I do not want to put any dates out there that might disappoint. So the process is under Medtronic's control, it's moving diligently and deliberately forward, and we should have positive results as soon as Medtronic can put all the information together. So with that answer, Liana, let me now turn it over to Roger to talk about another very exciting pipeline product we have which is the TransCon technology. Roger?

Roger Jeffs

Thanks, Martine, and good morning, Liana. So the TransCon technology for those who aren't familiar with it, is a license we did with our development partner, Ascendis, where treprostinil is formulated with a 20,000 [indiscernible] PEG via proprietary linker in a 4-to-1 [indiscernible] treprostinil 2 PEG. When it's complexed as this PEG-linker-treprostinil [indiscernible], it is inert and at least in animal studies today when injected it doesn't have any pain because it's inert until it's hydrolyzed in the plasma.

So what we're doing is working with Ascendis to do a lot of the IND enabling studies. This includes cardiovascular safety and pharmacology, toxicology and some PK and PD studies which are not trivial because we have to not only track the state of treprostinil from the linker but also the linker and the PEG-morbidity itself. Those studies are progressing nicely and we are also making Phase 1 CTM which is also not a trivial matter for all of those who've worked in the PEGylation field and tried to go around the nuances of PEG parity.

But having said, we're again having some very good success with our chemistry and all of that is building to a 2014 IND filing so that we hope to inject our first patient with this agent this year, and with the real goal to see first and foremost their side pain associated with the injection, and if not, then what is the state of treprostinil in the plasma and can we achieve therapeutic levels of treprostinil over sustained interval. The hope would be that we only have to give this injection once or maybe twice per week or even fewer times depending on the PK but we will certainly sort that out once we are in-human. So again another reason why we are very excited at United Therapeutics about our development pipeline and all that is in front of us in 2014 and beyond with our pipeline. Thank you, Martine.

Martine A. Rothblatt

Fantastic, Roger, excellent review of TransCon. Thank you, Liana, for your questions. Operator, we have time for one more question.

Operator

The next question comes from Robyn Karnauskas with Deutsche Bank.

Mohit Bansal - Deutsche Bank

This is Mohit Bansal for Robyn. Congratulations on all your progress this year. So I have one question on your neuroblastoma drug, so could you please help us understand the market opportunity with this drug and then how should we think about the pricing and then what are the next steps to gain the approval?

Martine A. Rothblatt

Excellent question. So we're talking about our first entry into orphan oncology, a neuroblastoma drug. The questions, I'm going to have to Roger to respond to because his team has been responsible for the development and regulatory highlights and also he will be managing the marketing and launch of that drug both in Europe and the U.S. So Roger, could you address the three points of the question?

Roger Jeffs

Yes, so in terms of – let me talk about where we are with filings first, I think Martine touched on this. We filed in December with the European authorities and we anticipate filing in the coming months in the U.S. In fact we just had our pre-BLA meeting with the FDA and that meeting went very well. So they are anxious and I would say very receptive to receiving this application given the high unmet need.

With regard to the number of patients that are addressable, just remind the callers that the antibody will be indicated if approved for high-risk neuroblastoma patients. If you look at the population numbers, we think that the numbers are between 350 to 500 patients in U.S. per year with an equal amount in Europe. So the addressable market in U.S. and Europe is about 1,000 patients. And even now I think pre-approval if you look at the number of those patients per year that receive the therapy, it's in the 80% to 90% range of patients. I mean this is a high unmet need with very dire outcome and this antibody has been shown, in clinical studies at least, to improve survival. So it's certainly something that physicians feel is the necessary part of the treatment algorithm already. So I think that's kind of where we are.

With regards to pricing, we are still working through the price of the therapy. It is a monoclonal antibody and will be priced accordingly but we also are considerate and we did license this from NCI and that the Children's Oncology Group was instrumental in doing the research and it really wasn't on our nickel, so we'll be sensitive to that when we price the therapy and we will try to price it responsibly and fairly.

Martine A. Rothblatt

Thanks Roger and perfect 360 degree answer. Operator, my Head of Investor Relations reminded me that on the annual call, the time period is 45 minutes, not 30 minutes, my bad on that. So can you please take the next caller?

Operator

The next question comes from Phil Nadeau with Cowen & Co.

Phil Nadeau - Cowen & Co.

Just a couple of financial questions. So first [indiscernible] moving pieces going into 2014, much in as you highlighted, John, if you [indiscernible] maybe more detailed guidance on your expectations for trends in both revenue and expenses for 2014? And then second question on Q4 2013, you did comment some of what we were modeling, I'm curious whether there was inventory changes in the quarter.

Martine A. Rothblatt

John, if you would not mind first just commenting on the inventory and then I'll answer the rest of the question.

John M. Ferrari

Sure Martine. So inventory during the quarter, Remodulin inventory dropped in both value and patient days and there was a slight increase in inventory for Tyvaso during the quarter.

Martine A. Rothblatt

So with regards to revenue, I think the best guide that I can really suggest you is to take a look at the trends that have been present for the past several years with regards to Remodulin, Tyvaso and Adcirca. These drugs seem to me to grow pretty linearly into their market space and all three of them are still a good ways away from total saturation of their market.

So let's take a look at Remodulin for starters. You are talking about here as I just described in answer to Liana's question, you're talking about a pretty invasive therapy. The patient have to wear a pump which is operating 24 hours a day. It's connected to a catheter which is then wound into either their skin subcutaneously or intravenously. So obviously, this is a therapy which is generally reserved for patients that are late New York Heart Association functional class III or perhaps functional class IV.

And there are by most public estimates that I've read somewhere between 25,000 and 30,000 patients treated for pulmonary hypertension in the U.S. and usually the numbers that I see, say about 40% of them, are functional class II, about 40% of them functional class III, and maybe 10% class IV and 10% class I. That's kind of how the bell curve wraps around that population.

So if you're looking at the class IV, you're seeing that there is maybe something like 2,500 to 3,000 class IV patients, and then if you're looking at the late class IIIs, total class III there might be something like 10,000 to 12,000, so the late class IIIs might be something like 2,000 to 3,000 out of that. So I've told you looking as an addressable market for Remodulin of about 6,000 patients in the U.S. Now of that addressable market, we have captured about half of it and every year, as you can see from our growing Remodulin revenue numbers, we continue to capture more and more, and I'd tell you, you can tell that from the Remodulin numbers because we have not increased the priced for Remodulin for quite a few years. I'm sure it's more than three years since we've increased the price of Remodulin. So the growth you see in Remodulin reflects real growth in patients and that's continued year after year.

The situation is even more similar but more dramatic for Tyvaso. Tyvaso is an inhalation product, so the product that perhaps the entire population of functional class III patients could avail themselves of. There are upwards of 10,000 to 12,000 functional class III patients as I just mentioned. So at present we have, again, penetrated less than half of that population, so clear indisputable room for growth and you can see that growth year after year. While we have increased the price of Tyvaso in accordance with increases in our costs, the growth in Tyvaso revenues is significantly in excess of the growth in our price for Tyvaso showing you a real growth in the patients using Tyvaso.

And then finally with Adcirca, this is a pill which could be taken by all 25,000 to 30,000 patients for pulmonary hypertension, and year after year our numbers have continued to increase. [indiscernible] we had 5,000 patients, we've had 10,000 patients, now we're past 15,000 patients and the growth continues, despite the fact we are now competing against generic tadalafil for an entire year and the result of that is that our Adcirca product has continued to grow, primarily because it's a once-a-day product compared to [indiscernible] that has to be taken three times a day implicating significant compliance issues which in turn could lead to cyclic vasodilation, vasoconstriction cycles that are not good if you have pulmonary hypertension.

So that's a preview on the revenue side. On the earnings side, I am really excited about 2014 mostly because 2014 is the year that our patent royalty to Glaxo finally end. And I will share with you and everybody else on this call in all openness the frustration that I have felt year after year after year paying 10% of our net revenues to Glaxo as a patent royalty for a drug that's 99.999% of the work, I mean the manufacturing work, the synthesis work, the formulation work, the clinical development work, the marketing work, the sales work, 99.9999% of the work is done by us, yet we have to pay 10% of royalties to Glaxo and it's been annoying, but it is what it is and it goes away in 2014, towards the end of the year at least.

So that of course is a 10% – it translates directly into a 10% jump in our profit margin and in our operating margin because we do not have any plans to increase spending into that 10%. So I expect that our operating margin in 2014 and 2015 will be even better than it's been in 2013 and 2012, and as I mentioned in my introductory remarks, you can't say anything too negative about a company that churns out non-GAAP profits more than $0.5 billion on $1 billion in revenue. So thank you very much for that question, and operator, ready for the next question.

Operator

Our next question comes from Bret Holley with Guggenheim Securities.

Bret Holley - Guggenheim Securities

I'm just wondering, and maybe you can't answer for competitive reasons, I'm just wondering how you are thinking about incentivizing your sales force relative to Orenitram and how you might carry the products [indiscernible] launch of Orenitram?

Martine A. Rothblatt

That is a bit of an unusual question but as Dr. Jeffs is in charge of the Orenitram sales force, I will transfer to him.

Roger Jeffs

I think probably the best answer is to say, you're correct that we won't comment on that.

Bret Holley - Guggenheim Securities

Okay, fair enough.

Martine A. Rothblatt

Next question, operator.

Operator

The next question comes from Geoff Meacham with JPMorgan.

Carter Gould - JPMorgan

This is Carter on for Geoff. The question is kind of a feedback on Bret's question, following conversations and launch plannings, do you have any incremental color on your pricing strategy, do you still intend to remain agnostic in terms of pricing? And then the other question is, I don't believe you mentioned any incremental details today on your antiviral program, previous status on that and your rationale going into antivirals?

Martine A. Rothblatt

Let's start at the beginning. So nothing has changed since our launch – since our approval conference call guidance on Orenitram. We do intend to price it so that it is agnostic in terms of revenue between Tyvaso and Remodulin. So there will be no revenue cannibalization as a consequence of the growth of Orenitram, since first of all the vast majority of the growth is going to be into patients who are not currently on Remodulin and Tyvaso, and for those patients who transition from Remodulin and Tyvaso, the net revenues that we generate from the patients would be roughly equivalent, whether they are on Remodulin or Orenitram or Tyvaso.

So it is priced on a per milligram basis whereas Remodulin is delivered on a nanogram per kilogram per minute basis, Tyvaso is basically a fixed price per vial, so it's not possible to give kind of an exactitude of comparison for the prices among these three drugs, but as best as we can determine the net revenues per patient to us are going to be roughly equivalent across all three drugs.

The antiviral program is doing very, very well. It has reached the necessary level of success in terms of testing our new antiviral candidate in animals who have allowed us to file an IND to begin our first in-human testing of this lead antiviral product we call UV-4, Unither Virology 4, against dengue disease. This development is as you may recall pursuant to a significant contract that we received through the NIH. The government feels that there is an important unmet medical need to develop a broadband antiviral generally and in particular one against agents for which there are no acceptable treatments to-date such as dengue.

So the government took a look at our antiviral platform and found that it has a great number of attributes that they liked, it was an agent that could be transported, shipped, stored relatively economically, fast acting, and most important and most exciting for me is the potential for a single agent to work against the wide variety of viruses even if the exact nature of that virus is not previously known. The strategic value for us in developing this antiviral platform relates to the fact that we have the intellectual property rights to this antiviral agent pursuant to a strategic partnership which we negotiated several years ago with Oxford University and this antiviral platform is so broad-based, it really has enormous potential.

Our Company's first credo is to develop the best possible medicine that we can out of the intellectual property that we have. So this is a great intellectual property that we have, the antiviral platform, and we are able to develop this without using operational spending from the Company's overall budget. Instead, the vast majority of the funding is coming from the government. And finally the revenue potential for this meets our internal goal of targeting products that have pass-through into $1 billion a year revenue potential. So it's met all the right requirements, we have hired a second to none team of antiviral clinical developers, and as I mentioned, they've reached an exciting milestone with the IND filing just last month.

Carter Gould - JPMorgan

Thank you.

Martine A. Rothblatt

Great. Operator, we have time for one last question. This would be the last question.

Operator

The next question comes from Matt Kaplan with Ladenburg Thalmann.

Matthew Kaplan - Ladenburg Thalmann

Couple of things. Could you comment a little further on the status of the Sandoz litigation, and then in terms of pipeline, give us an update on beraprost?

Martine A. Rothblatt

Let me turn the first question over to our IP guru, Andy Fisher, and then I will talk about beraprost.

Andrew Fisher

Thanks Martine. The current status of the Sandoz litigation is that we've sort of come to the end of a lot of the formal part of the pre-trial preparation including that discovery, expert discovery is nearing an end. The summary judgment process is underway and those motions and responsive motions and hearings are at least calendared to be completed within the next several weeks or month or so, and trial is currently scheduled for this spring. So that's the basic rundown of the status of the case.

Martine A. Rothblatt

Thanks Andy. With regard to beraprost, this is an analogue of prostacyclin, as I described earlier in the call, prostacyclin being the key molecule that's diminished in pulmonary hypertension patients and giving rise to their symptoms. Beraprost is a different analogue than treprostinil which is the active agent in Remodulin and Tyvaso and Orenitram. We in-licensed beraprost exclusively from Toray Industries in Japan several years ago and have been exploring it for the past few years to find out what type of treatment regimen would be best attuned to its pharmacokinetics and pharmacodynamic properties. It does have different PK and PD properties from treprostinil which gave rise to the observation by Dr. Lewis Rubin, one of the leading gurus in the pulmonary hypertension field, that the PK/PD properties of beraprost were ideally suited to be matched with Tyvaso, the inhaled treprostinil analogue.

So we discussed that with the FDA. They were very, very excited especially with the type of morbidity/mortality protocol that we described to them which has a key element of failure to improve something we have seen with [indiscernible] for very much. We described it, we discussed the protocol with the leading centers in the United States. All of these centers have been very excited about the protocol as well. And hence, this year we launched the BEAT trial which is an acronym for Beraprost Extended release in Addition to Tyvaso, and this is a clinical trial in which each time a patient takes Tyvaso inhalation, they take a beraprost pill, and the quick uptake and quick follow-off of Tyvaso is balanced with the slower uptake and slower follow-off of beraprost, allowing a patient to have both a continuous level of prostacyclin analogue in his system as well as a mix of different prostacyclin receptor characteristics between treprostinil and beraprost that will hopefully allow the patient to remain longer on Tyvaso.

Currently, our patients stay about 20 months on Tyvaso, and while that's good we could really do a lot better. And really that's a kind of a saying that goes for the whole pulmonary hypertension field. When we started our company and Actelion started their company, the mean survival of a patient who had pulmonary hypertension was 18 months, not even two years, and not surprisingly there were very few patients with pulmonary hypertension. Because of the excellent efforts of Actelion, ourselves, Pfizer and other companies, the mean survival of patients with pulmonary hypertension today is seven years. Well, that's a lot better than a year and a half and we can pat ourselves on the back, but remembering that the average age at which a patient contracts pulmonary hypertension is in their 30s, we can do a lot better than seven years, and our goal with the BEAT trial is to be able to extend the efficacy of Tyvaso by combining it with beraprost so that we can start moving that seven year number on the dial for eight years, ten years and even further.

We've done a lot in pulmonary hypertension, we have the right range of products, we have the leading market share in each of our three segments, but we really don't pat ourselves on the back so much about that as we say, how can we do better, and hence you heard Roger talk about TransCon Treprostinil, you heard me talk about the implantable pump, we are launching Orenitram, we've got in our pipeline the FREEDOM-EV study and the BEAT study. So our mantra at United Therapeutics is how can we do better and better and better for the patients of pulmonary hypertension.

Thank you everybody for participating on the call today. Operator, thank you for hosting the call and you may now wrap it up.

Operator

Thank you for your participation in today's United Therapeutics Corporation conference call. This call will be available for replay beginning at 11.30 AM Eastern Standard Time today through 11.59 PM Eastern Standard Time on Friday, February 28, 2014. The conference ID number for the replay is 58833697. The number to dial for the replay is 855-859-2056 or 404-537-3406. Thank you. You may now disconnect.

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