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United Therapeutics Corporation (NASDAQ:UTHR)

August 24, 2011 9:00 am ET

Executives

Martine Rothblatt - Founder, Chairman and Chief Executive Officer

Roger Jeffs - President, Chief Operating Officer and Director

Analysts

Terence Flynn - Goldman Sachs Group Inc.

Robyn Karnauskas - Deutsche Bank AG

Michael Yee - RBC Capital Markets, LLC

Matthew Kaplan - Ladenburg Thalmann & Co. Inc.

Liana Moussatos - Wedbush Securities Inc.

Mark Schoenebaum - ISI Group Inc.

Joseph Schwartz - Leerink Swann LLC

Philip Nadeau - Cowen and Company, LLC

Geoffrey Meacham - JP Morgan Chase & Co

Operator

Good morning. My name is Alene. I will be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation 8/24/11 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 the 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, Dr. Rothblatt, you may begin your conference.

Martine Rothblatt

Good morning, everyone. Thank you for joining us for our conference call this morning. I'm joined on the call by Dr. Roger Jeffs, our President and Chief Operating Officer. The bulk of the call today will be dedicated to reviewing the results of the FREEDOM-C2 study. As described in our press release, we did not hit our primary endpoint for the study. I would like to take a moment, though, to put the study into context of our broader business.

The company has a fantastic franchise in pulmonary hypertension. We have growing revenues from 3 separate products, Adcirca, Remodulin and Tyvaso. These drugs are the leaders in their respective market shares, and all 3 of them have prospects for continued growth. We have previously guided toward $750 million, $875 million and $1 billion in revenue plus or minus 5% for 2011, '12 and '13, respectively. And none of those revenues included any contribution from oral treprostinil.

We previously reported excellent results from our oral treprostinil FREEDOM-M study as a monotherapy drug, and we remain confident as we expressed at that time that, that single study, with its highly statistically significant p value, will support approval on its own.

We are also moving forward on strongly into Europe and Asia with anticipated IV Remodulin approval in Europe by the end of this year. The commencement of the TRIUMPH-2 inhaled Tyvaso study for European approval starting in next year. And of course, we will file for approval of all treprostinil as monotherapy in Europe as well as the U.S.

So the company has a tremendous franchise in this field, very strong financial and strong growth business. So despite the disappointment that we announced today, and Dr. Jeffs will provide considerable amount of color on, the company's overall prospects remain extremely good. Roger, could you please now give us some color on the FREEDOM-C2 results.

Roger Jeffs

Certainly, Martine. So I'll use my time today to address 3 fundamental questions. One, what are the FREEDOM-C2 data? Two, what are the possible reasons that contributed to the results observed? And three, what is the impact of the FREEDOM-C2 study on the NDA filing of FREEDOM-M?

With regard to what are the FREEDOM-C2 data, as a prelude, I want to stress that this data review is not meant to be a complete and comprehensive review and all the data that are provided today are based on our preliminary review of the core efficacy data only. I also want to direct listeners to our web portal, www.unither.com, under the Investor Relations section, where summary slides have been uploaded to benefit your review and analysis.

So with regard to the first question. FREEDOM-C2 was a multicenter, randomized double-blind placebo controlled study in PAH patients who are optimized on 1 or more approved oral PAH medicines at the time of study entry. This included ETRAs and PDE-5 inhibitors or both. The study treatment period was 16 weeks. The primary efficacy population or intend to treat population consisted of 310 patients who are randomized 1:1 and who received study drug, with 157 patients in the active group and 153 patients in the placebo group.

The treatment groups were very well balanced at baseline. Approximately 65% of the patients were idiopathic or familial origin, with approximately 31% having collagen vascular disease as their primary etiology, and the remainder having PAH as a result of a congenital heart defect or HIV. Approximately 78% of patients in both groups were female.

With regard to WHO functional class at baseline, approximately 26% of patients in those groups were WHO Class II and approximately 73% of patients were WHO Class III. The main baseline 6-Minute Walk distance was 329 meters in the active group and 336 meters in the placebo group. All patients were receiving an approved oral PAH therapies at baseline, with approximately 40% receiving dual ETRA PDE-5 therapy, 42% receiving PDE-5 therapy only and 18% receiving ERA therapy only.

Regarding patient disposition, the number of subjects completing this study was very favorable, with 84% of active patients and 90% of placebo patients completing the 16-week study. Clinical deterioration and deaths were infrequent and similar between the active and controlled groups, but discontinuations due to adverse events were more frequent in the active group with 11% of patients discontinuing due to an adverse event in the oral treprostinil group, compared to 3% of patients in the placebo group. The type of background therapy did not appear to influence the drop-out rate due to intolerance.

With regard to the primary efficacy analysis of placebo corrected change in 6-Minute Walk Distance at week 16, the median difference between the oral treprostinil and placebo groups was 10 meters, with a p value of 0.089. The average BID dose in the active group at week 16 was 3 milligrams, which was in line with the intended target dose.

Preliminary analysis of other secondary efficacy measures, including changing Borg Dyspnea score, through functional class, timed to clinical worsening Dyspnea fatigue index and PAH signs and symptoms, showed that active treatment was not significantly different from placebo.

So now let's move on to the second question, which is what are the possible factors that contributed to FREEDOM-C2 not achieving a significant result? I think 2 key issues come to bear. First did the placebo patients improve their median 6-Minute Walk distance by 11 meters, whereas active patients improved by 15 minutes with the median difference being 10 meters as stated. But it's somewhat surprising that patients who have been on background therapy on average for 2 years were optimized but not improving on their therapy and thus opting for a clinical trial will then improve their walk over the course of the 16-week study in the placebo group.

Perhaps it's a result of a more focused compliance on the background medication, stricter attention to care, for example, diuretic management of fluid balance and/or better management of diet and exercise as a consequence of frequent observations from the being in a clinical trial. Regardless, the improvement of placebo patients certainly made the attainment of a significant efficacy result that much harder.

Secondly, it is possible that patients are not improving on background therapy being enrolled in this trial may include a higher proportion of patients that are poor responders. Responsive patients, obviously, would be less inclined to enroll in the clinical trial as the disease status improved and well managed by mono or dual background therapy that they have been previously prescribed.

So in closing, I'll address the final and perhaps most question, what is the impact of FREEDOM-C2 data on the NDA filings for oral treprostinil? As we have stated previously and as Martine intimated, it is our intention to file an NDA for oral treprostinil based on the significant findings of the FREEDOM monotherapy trial, which we unblinded in June and reported our Hodges-Lehmann improvement in 6-Minute Walk distance of 23 meters with a p value 0.0125.

The NDA submission build has been ongoing since then, and we will now work to integrate this FREEDOM-C2 findings. While the results of FREEDOM-C and C2 studies will likely not support a label claim for add-on use, these studies do provide consistent trend evidence and perhaps most importantly, bringing a cumulative exposure to oral treprostinil to over 1,000 patients, which will clearly help to inform the overall safety profile of oral treprostinil.

Someone in the call may ask, why do you feel that an NDA can be submitted based on a statistical success in only 1 study? The answer is that we believe that a single study with a p value 0.0125 is sufficient to establish the efficacy of oral treprostinil, given the FDA's prior findings of safety and efficacy of the same drug substance, treprostinil when administered by 3 other routes of administration, subcu, IV and inhaled.

While we believe that this is consistent with the 1998 guidance document titled, Providing Clinical Evidence of Effectiveness for Human Drugs and Biologic Products, which speaks quite clearly to our intended path for submission, in particular, Section II-C, II-A, which is on Page 8, states that a single study of a new use or new dose, regimen or dosage form, may be sufficient for approval when there's independent substantiation from study date in related uses. In this instance, we believe that FREEDOM-M provides the data to unequivocal support on the effect of oral treprostinil in treatment-naive patients. And the existing efficacy data on 3 other routes of administration provide independent substantiation that the drug has the effect that it's purported to have.

Although the safety data from FREEDOM-M and FREEDOM-C2 studies have not been completely analyzed, we believe that the totality of the safety data from the large number of patients exposed to oral treprostinil via the trilogy of FREEDOM clinical studies provides additional evidence that we believe will support a positive risk/benefit conclusion.

So with that, Martine, I will turn the call back over to you for questions.

Martine Rothblatt

Thanks, Roger. That was a great survey of all of the key information.

And operator, we would now be pleased to field questions from the callers on the line.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Phil Nadeau of Cowen and Company.

Philip Nadeau - Cowen and Company, LLC

Questions on the 16-week duration of the study. It looks like, by looking through your slides, that there was no plateau in the response of the patients. The longer that they're on drug, the further they walk, the better the improvement. So can you remind us why the study was a 16-week study and not a longer study? And do you plan to do any future studies that may look at longer durations or dosing in a combo therapy environment?

Martine Rothblatt

Yes. Thanks for your question, Phil. Roger would be the best one to answer that.

Roger Jeffs

Thanks for the question, Phil. So I think you are correct that with increasing duration of exposure, there seemed to be a greater effect of the therapy when used in -- as add-on therapy. The trial was designed as a 16-week study. It was more in line with past historical studies of add-on therapy that has been anywhere from 12 to 16 weeks. And it was an effort to replicate those previous studies. I think, one of the issues as I alluded to earlier is that the patients that are enrolled in these studies may be changing from earlier studies that were done historically, in that patients are now less inclined to come into a clinical trial, unless they're not responding to conventional therapy, which may then self-select a nonrespondent population. We haven't considered yet whether or not we would do a trial of longer duration. I think, one of the things that we are going to do is do a -- which we have agreed with FDA -- EMA, I'm sorry, is with Tyvaso, is to do a even-driven, time to clinical worsening study in monotherapy patients. So that gives us 2 benefits. One, it's a monotherapy population without the compound of background therapy and potentially selecting a nonrespondent population. It also gives us a time to clinical worsening, morbidity, mortality endpoint, which then, therefore, necessitates a longer-duration study. So I think we're going to achieve what you're asking with inhaled treprostinil Tyvaso first, and then we'll have to consider whether or not we want to also endeavor in that effort with oral treprostinil at this point.

Philip Nadeau - Cowen and Company, LLC

Okay. And Roger, just to follow up on one of your points. Can you remind me, is this the first trial that we've ever seen where you're really looking at a triple regimen in many patients? So almost half the patients were on oral plus PDE-5, plus an ERA. Can you remind me if you've ever seen a trial looking at that for other agents in the past?

Roger Jeffs

Yes, good point, Phil. So this is the second trial that's done this -- the first one being the FREEDOM-C2, the FREEDOM-C study. So we're the only one that's done this to date to our knowledge. I think the rationale for doing that is that's where treatment is trending. And as you can see by the randomization, where almost half of the patients were on dual background therapy that is becoming the treatment du jour most commonly. So we were trying to accommodate patients as they are treated, and as we would envision adding oral treprostinil. And unfortunately, the result was a little bit short of goal.

Operator

Our next question comes from Robyn Karnauskas of Deutsche Bank.

Robyn Karnauskas - Deutsche Bank AG

I guess, just to follow up a little bit on Phil's question and your comments regarding that. So are we going -- when will we receive longer-term data from FREEDOM-M, and how much insight do you have from that extension study? And what are your expectations for longer-term therapy as you continue to dose up these patients over time?

Martine Rothblatt

Roger, I think, you'd be best to answer those questions.

Roger Jeffs

Yes. So maybe I'll tackle that in a couple of ways. So first, Robyn, we have presented some of the longer-term open-label extension data at the past year's ATS study. So I'll guide you and others to that abstract that was presented to gain some long-term, mostly safety data. There wasn't really any efficacy to that presentation, but it did speak to exposure. I think the other important thing to look at when you look at the FREEDOM studies, particularly M in terms of its distribution of responses and C2 in terms of the distribution of responses, you could see there are populations of patients that have very robust and significant responses even here in C2, where the entire population as a whole had a 10-meter improvement. 20% of patients had a 70-meter improvement. So what that means in terms of clinical duration of the therapy once we commercialize it, hopefully, is that I think, patients will test -- will try the agent in concert with their physician. And if they are a robust responder then they will maintain the therapy. If they are not, then it is likely that they will discontinue the therapy, given the other treatment options that are available, including our own. So I think, there is good data from both our extension trials that there is long-term durability and improvement of the therapy, and then even within the shorter-duration trials, there is significant clues that there are significant populations of patients that respond quite robustly to the treatment.

Robyn Karnauskas - Deutsche Bank AG

Are we seeing efficacy beyond the 12 weeks, and 3 of them continued increased efficacy as the dose continues to go higher? Or is it just being maintained?

Roger Jeffs

Well, again, that's a difficult question to answer for 2 reasons. One, everybody that's on placebo gets transitioned to active therapy. That's sort of the carrot to get them in a monotherapy trial, for example. And then -- and so there's one issue. We don't have a control group. You are self-selecting a responder population because the patients that maintain the therapy are obviously the ones that are responding. So I think, the obvious answer is yes, that you will see continued improvement with continued dose, but it's in your response of patient population. So I don't want to oversell it nor undersell it, but I'd just be sort of balanced in the analysis of an open-label trial as it is. We are seeing good durability with the therapy. We are seeing a large proportion of the patients continue and respond favorably. Whether to say it would continue to increase without a placebo group, I can't really -- I can't make a definitive statement that it improves patients over the longer-term, although it appears to.

Robyn Karnauskas - Deutsche Bank AG

That's helpful. And the only other question was on AEs, the 11% AEs. When did those occur during the course of treatment, early in the dosing or later?

Roger Jeffs

Yes. So again, this is -- we only unblinded this data mid-morning yesterday. So that's a question that we haven't fully addressed. My suspicion is these patients probably dropped within the first month of treatment. So they're having their last observation carried forward, which is going to be essentially their baseline walk, so they're going to represent no change. So while it's a few patients, the fact that you'd have 10% of your patients with no change in the active group doesn't help you, obviously. But that's the reality of doing the trial with a drug that's potent, has side effects, and you're adding it to therapies that also have similar side effects. We were quite pleased with the dropout rate being only 10% in this active group trial. I think that's not atypical for what you see with all other therapies, but the realities are you're adding a drug with an adverse event profile typical of prostacyclins to drugs like PDE-5 that also cause headaches. There is a chance in a small minority of patients to exacerbate AEs that lead to discontinuation, and that's what we observed.

Operator

Our next question comes from Matt Kaplan of Ladenburg.

Matthew Kaplan - Ladenburg Thalmann & Co. Inc.

Two things, quickly. Roger, did you see any geographical differences in the results? And then also in terms of the dose titration, you didn't get as high a dose as quickly as you saw in the FREEDOM-M in the FREEDOM-C [ph], could you speculate on why you saw that?

Roger Jeffs

Yes. Thanks for the question, Matt. So in terms of geographic distribution, the way we view that is through a co-variate test to see if there's a treatment impact based on geographic distribution of enrollment. And when we've done that co-variate test, there is not a significant impact of geographic location on walk. So the answer, at least topically, is no, there is no geographic impact on effect. In terms of the dose titration, probably the reason the titration schedule was a little bit softer than in FREEDOM-M, is, again, because patients are on therapies already that are causing some adverse consequence in and of themselves. So when you're adding a potent dose of dilator to other potent dose of dilators that has to be done a little bit more slowly and, perhaps, more carefully. So I think that's the nuance of that.

Operator

Our next question comes from Mark Schoenebaum of ISI Group.

Mark Schoenebaum - ISI Group Inc.

The first question I had actually a little bit off the data topic, but Martine, I was just wondering if you could remind us how much cash United Therapeutics has right now. And whether or not you consider returning any of that cash to shareholders at this point. And I have a follow-up, please.

Martine Rothblatt

Sure, Mark. We currently have around $900 million in cash and cash equivalents, so a bit shy of $1 billion. We do continue to accrete cash monthly as the Tyvaso, Remodulin at circuit franchises are profitable, with actually improved business operating margins year-over-year. We are obligated to redeem $0.25 billion worth of converts in just another couple of months. So that will definitely take a dip out of that. And then, finally, we -- it is in our DNA to do share buybacks. We've done a couple already. So we constantly review the market environment and taxes situation to determine whether the timing is right for engaging in that type of a action. So it's something we're looking at all the time. And clearly, we're going to be looking at it more now than had the results gone the other way.

Mark Schoenebaum - ISI Group Inc.

Okay, fair enough. Roger, just when I look at the FREEDOM-C trial, I think, you reached a mean dose of 2.5 milligrams. In the FREEDOM-C2 trial, you reached a mean dose of 3. That's a decent improvement in terms of -- decent percentage increase, I guess, I don't know if it's 15%, 17%, something along those lines, yet you saw the efficacy actually come down?

Roger Jeffs

Yes.

Mark Schoenebaum - ISI Group Inc.

Can you just -- I'd just be curious to get your thoughts. And then when I couple that also with the observation in FREEDOM-M with patients that had access to the 0.25 milligram dose seemed to do worse than patients who didn't, I get very confused in trying to think about a dose response curve and the impact of the 0.25 milligram dose on the efficacy of this drug product.

Roger Jeffs

Yes. So maybe I'll take the first question. So when you look at these average doses that exit, they also are one of the things you must consider is those are completers analysis. So we're only talking about average doses of exit for patients who actually exited it. So remember, in FREEDOM-C, less patients exited the study. So therefore, the actual dosing was much more confounded. So you are right. I think the lower tablet strength did help achieve a target dose of -- which was we were trying to get between 2 and 4 milligrams BID and we got a 3 milligrams BID, which is a parental equivalent of about 30 nanograms per kilogram per minute infused. So we felt that was a sufficient dose to observe efficacy. The difference, obviously, between when we did C and C2 is, I think, that the patient populations that are entering these trials may be changing. And that as I've said now several times, we may be selecting a less-responsive population of patients. In terms of FREEDOM-M, I'm not sure I agree with your statement that the 0.25 milligram patients achieved a lower dose or a lower outcome. I think, again, in totality, that was a very successful study both across the population and then within subsets of populations in terms of distribution of response. So any way you slice and dice FREEDOM-M, that's a successful study that's robust, and will form the basis of our NDA submission and approval.

Mark Schoenebaum - ISI Group Inc.

I'll drop off but I just -- the only reason I made that comment, Roger, is because in FREEDOM-M, the ITT population, the placebo-corrected walk distance, I think, was higher than in the 0.25 milligram population.

Roger Jeffs

They're ostensibly the same, though.

Operator

Our next question comes from Geoff Meacham of JPMorgan.

Geoffrey Meacham - JP Morgan Chase & Co

One on the study and one on the approval pathways. So when I look on Slide 16 and combine that with your comments, Roger, about the background therapy of patients improving their walk distance, what were you guys seeing on the standard deviation side? Was there a little bit more statistical noise in the study that you had anticipated, and relative to the FREEDOM-C as well?

Roger Jeffs

Yes. So thanks for the question, Geoff. So the standard deviation was exactly as anticipated. So it was, I think, between 65 and 75. I don't recall the exact number off the top of my head. We had -- the assumptions were that we'd go around 75 meters, which is what we've seen throughout the treprostinil series or franchise of studies. And that's exactly where we were here.

Geoffrey Meacham - JP Morgan Chase & Co

I got you. Okay. And then just on FREEDOM-M and the approval pathway. So obviously, you guys are going to ask for monotherapy approval with the restrictive label. But I mean, clearly FDA has got to recognize that combo use is going to be the standard of the market, because you just don't have that many monotherapies beyond just PDE-5. So how do you convince FDA that you can either severely limit this, or prevent combination use if you're asking for a more narrow label based on FREEDOM-M?

Roger Jeffs

Yes. So great question. So I think the data support that the drug should be used first line. And if you talk to physicians about what the gold standard of therapy is, they would say prostacyclin. And the reason is that the only class of compound that's showing a survival advantage. So all we're going to argue and seek labeling for, which the studies fully support, is that oral treprostinil should be made available to patients with pulmonary hypertension for first line use. Now the question that you're asking is would there be a risk to the public, well in particular, this sub-population of patients with pulmonary hypertension, if the drugs were then used "off-label" as either second or third line therapy. And I think what you clearly can see from FREEDOM -- both FREEDOM-C and FREEDOM-C2, there's absolutely no risk to the patients. The patients didn't get worse, they actually improved. They just didn't improve enough to cause a statistical hurdle for which you correctly state, we can seek labeling for. So we will not promote it in that way, but we certainly would promote it as first line use as a gold standard therapy and the first available oral prostacyclin therapy in the U.S.

Geoffrey Meacham - JP Morgan Chase & Co

So you would technically maybe contraindicate any additional add-on therapy beyond oral treprostinil?

Roger Jeffs

No, I think the label would say that clinical studies have not demonstrated effective use of the therapy as add-on.

Geoffrey Meacham - JP Morgan Chase & Co

As an add-on. Okay.

Roger Jeffs

Yes. So that was it. It's not like it's a black-box warning, it's just in the clinical section.

Geoffrey Meacham - JP Morgan Chase & Co

And I know Europe is kind of a wild card. But do you think, that -- what are your -- what's your thinking now in terms of filing for oral in Europe?

Roger Jeffs

Yes, so 2 points. One, let me speak to the timing of filings. It's our intention, obviously, the highest priority of anything we're doing at this company, is to file oral treprostinil, which we will endeavor to do in the first quarter of 2012. We will also engage the EMA in discussions about this data set and solicit their opinion on a filing, given the same strategy. Whether or not they interpret it the same way that the FDA guidance clearly allows us to file this, that will be part of that discussion. And the way that the timing of that has to occur, because their request for meetings would be in 2012, and we'd actually have that first meeting.

Operator

Our next question comes from Joseph Schwartz of Leerink Swann.

Joseph Schwartz - Leerink Swann LLC

One of my questions has been asked, but I wanted to see whether you noticed that dose response oral pill size effect in this study, and I know in the -- you saw that in the FREEDOM-C study, but not on the FREEDOM-M study, and I don't see that in the slides. But it would seem to support the strategy that you we're using if it was observed, and then you could guide the physicians to use it appropriately, you could train them in this area?

Roger Jeffs

So again, it's -- the way to look at that is to look at exit dose at week 16 and then try to see based on -- and we quart -- we put patients in quartile, based on the dose achieved at exit. And it is true that patients in the highest dose quartile, which in this case was about 4 milligrams BID, had the most robust response. Which would suggest, though that doesn't definitively prove, that the more drug you get, the better outcome. It wasn't a perfect quartile response, but the first quartile was actually a little bit better than the second quarter. But then it did move upwards where the third quartile of exit dose was better than both the second and the first. And the fourth was, by far, the best.

Joseph Schwartz - Leerink Swann LLC

And then in the pill-size dynamic, did you see what you thought you would see there as in FREEDOM-C? Or was it also more like FREEDOM-M?

Roger Jeffs

Well, I mean, all of the patients started on 0.25, and then were incremented by 0.25 or sometimes 0.5. I think the results, and I think it is something that Mark Schoenebaum alluded to, the drug was well tolerated. I mean, when you have 84% of your patients completing the study, that's a very good outcome for us. So the tolerability was good. Was the dose needed? I don't think so. We achieved 3 milligrams as an average exit dose, and then we had 75% of the patients achieved greater than 1.7 milligram -- 1.75 milligrams BID, which is much better than we first observed in FREEDOM-C. So I think we did what we set out to do, which was to develop a dosing regimen that was more tolerable for patients and would allow us the opportunity, if it existed, to observe a treatment effect. Unfortunately, over a 16-week duration with a fairly aggressive dose strategy, we were unsuccessful.

Operator

Our next question comes from Terence Flynn of Goldman Sachs.

Terence Flynn - Goldman Sachs Group Inc.

Just had question on the expense side. I was wondering, in terms of your R&D outlook, I guess in the out years, I know you now committed to run the other trial to date on Europe, you're going to initiate the oral beraprost Phase III program as well. Maybe can you comment on R&D spend going forward to have us think about that now that oral Remodulin is behind us?

Martine Rothblatt

Right. Well, Terence, I also would want totally -- let me start at the back end, the lesser part of the spend. I wouldn't say that oral Remodulin is totally behind us, because I know that we're going to be undertaking robust Phase IV program with oral Remodulin, once approval is obtained in the U.S. and the EU. So there'll be -- we continue to do on trials with oral Remodulin. It's an amazing fact that prostacyclin can be delivered that way. The next area of spend, as you indicated, is our second-generation prostacyclin analog, beraprost-MR. The Phase IIb study for that will be completed by November or December. We previously reported strong Phase IIa results. And all of the centers are being lined up to commence the Phase III trial right at the end of this year. So that would be the next area of significant spend. As Roger indicated, we will commence a FREEDOM -- on our TRIUMPH-2 study in the EU, we have a 10-year orphan drug exclusivity for Tyvaso in the EU. So we're going to move forward after a monotherapy discussion, we secured a European agreement to a protocol, which, I think, would be very insightful, very important to clinicians in terms of it being a monotherapy study of what the endpoint to time to clinical worsening. So that will also be important in terms of expanding the label for Tyvaso here in the U.S. So those are the -- our main areas of spend. The total amount of money spent pursuing those different activities definitely should not exceed the envelope that was established previously. And if we look at R&D spending for 2012 as basically being very similar to the R&D spent in 2011. Although, revenue will continue to climb in 2012 as compared to 2011.

Terence Flynn - Goldman Sachs Group Inc.

Great. And just one quick follow-up. On oral beraprost, are there any learnings from the oral Remodulin program that maybe you could apply to the oral beraprost program?

Martine Rothblatt

Well, we learned everything we can. I mean, we are -- if nothing else at UT, we are one giant learning machine. So we look at everything. We share information. We analyze information. We consult with experts. Part of the reason it's taking us until the end of the first quarter of next year to file the NDA for oral treprostinil monotherapy is because there's a huge amount of data to digest between the first FREEDOM-C study, the FREEDOM-C2 study and the M study. We want to make sure that we know all the lessons of that. Plus we have the ongoing oral beraprost Phase IIb study that is testing patients. We'll be on both ETRAs and PDE-5, as well as one of the other. So we'll have all of that data to guide us in sizing the study definitively, in terms of hitting the time to clinical worsening endpoint as soon as possible. So the answer is definitely yes. It is a very different molecule. If you take a look at the 2 of them with like a ball and stick chart of the 2 molecules, they just only vaguely look similar. They have very different profiles. Beraprost is used unsuccessfully as beraprost-MR is used successfully at combination therapy in Japan. So we want to learn what we can, but also be aware of the differences between the 2 molecules.

Operator

Our next question comes from Michael Yee of RBC Capital Markets.

Michael Yee - RBC Capital Markets, LLC

Just wanted clarification on some of your earlier commentary. I guess, assuming approval, is your interpretation that clinicians would use this drug first line as a monotherapy? Or do you think that realistically, this would be a monotherapy after failing other oral combinations who just sort of aren't getting the good response sort of what you saw here and then actually came into the study? So sort of after other drugs and before Tyvaso, what were your thoughts there?

Martine Rothblatt

Yes, that's a great question. And there's a tremendous diversity of patients presenting with pulmonary hypertension, it goes up to 12 different critically analyzed sub-categories of WHO Category 1 pulmonary hypertension, and that's just what we know. We really don't know most of the information that would relate to the actual pharmacogenomics of therapy for people with pulmonary hypertension. So every patient's got to be looked at individually and treated individually. Similarly, the physicians in the field are still learning their way. Every 2 or 3 years, there is a world meeting of the physicians treating pulmonary hypertension, and they agree on a differential treatment algorithm, basically how to treat the patient. And even within the treatment algorithm itself, there are multiple different paths that are left up the physician's judgment, aside from the fact that the whole tree itself changes fairly significantly every 2 or 3 years as the drugs are approved and new experience is gained. So basically, a 1-word answer to your question will be diversity. There's just going to be a huge diversity of treatment practices and experiences out there. But then we go ahead and dive one level deeper. There is a very strong sentiment based on almost 2 decades worth of experience that prostacyclin is the preferred drug for treating patients with pulmonary hypertension, if it could be delivered easily and without debilitating or quality-of-life compromising side effects. And that's the goal of the FREEDOM study, for us to get that prostacyclin into pill form so it can be delivered easily. So for example, physician, seeing a newly presented patient that perhaps looks to the physician to be in perhaps need of the most potent medicine that could be helpful and actually remodeling the patient's situation, may be very well go straight to prostacyclin therapy. On the other side of the coin, what we are seeing more and more is that this notion of stacking one therapy on top of another therapy on top of another therapy, will not, for all patients, produce the best benefit. It also imposes not only a big -- it also imposes a cost burden on the system, but it imposes a big pharmacotherapy treatment burden and management burden on physicians, the nurse, and the patient and patient's family. So I think what you are going to see more and more is if a patient stops responding to an ETRA or to a PDE-5, or to the combination of an ETRA and a PDE-5 to remove the patient from what they are not responding to and put them on something that they might have a chance of responding to such as oral prostacyclin. Now if you quantify all those different results, all those different outcomes, what you'd see is that in the Class IV space, New York Heart Association Class IV space, where patients are in extremis, statistically expected survival of 6 months, there is no better treatment for those patients than parenteral Remodulin, where to use the expression of Dr. Lewis Rubin, the patient really needs to be bathed in prostacyclin, heart, lungs, platelets throughout the entire system. If the patient is a New York Heart Association Class III patient, whether you want to add prostacyclin therapy on top of background therapy or you want to remove the background therapy, which is not working, and put the patient on just on a prostacyclin therapy, inhaled Remodulin is available today, it's under the brand name Tyvaso. And it's been proven very, very effective. And it's continuing to grow in use and adherence among physicians and patients. And as Roger mentioned, we are now going to be extending that therapy into Europe with a follow-on study, very novel design, monotherapy time to clinical worsening. Now if you are in the Class II space, New York Heart Association Class II space, unfortunately, those patients, who need prostacyclin, because the ETRAs and the PDE-5 are not giving them everything they need, that is outside the label of Tyvaso. The label of Tyvaso is limited to New York Heart Association Class III patients. So it is amongst these Class II patients, where oral treprostinil can make a significant difference. And there are upwards of about 10,000 to 15,000 Class II patients in the U.S., another 10,000 to 15,000 Class II patients in Europe. Now for many of them, the PDE-5 and the ETRA will work, but the sad fact of the matter is, is that the average duration on either a PDE-5 or an ETRA before a physician feels a need to add additional therapy because those drugs are not working is between 12 and 24 months, so fairly short period of time. And I think it's at least half of that population will end up being the prime market for an oral treprostinil monotherapy, so upwards of about 10,000 or more patients alone between the U.S. and Europe would be the right population for oral treprostinil monotherapy.

Michael Yee - RBC Capital Markets, LLC

That's very helpful.

Martine Rothblatt

My pleasure, great question. It really allowed us to sort of carve through all the different New York Heart Association categories.

Operator

Our final question from Liana Moussatos of Wedbush Securities.

Liana Moussatos - Wedbush Securities Inc.

If both oral treprostinil and beraprost-MR get approved, how do you see them being used?

Martine Rothblatt

Yes, great question. I always know I can count on you to find a kind of paradoxical question in everything, so that's great. Well, first of all, are likely to have 2 different labels. In the case of oral treprostinil, it's likely that it would be a monotherapy label. In the case of beraprost-MR, it's being tested in combination with ETRA, PDE-5, or the combination of the 2. So that's one difference right there. Secondly, we have not even commenced the Phase III trial. The first patient is scheduled to be enrolled in December of this year in the beraprost-MR Phase III trial. So it's difficult to -- it's impossible, really, for me to make any forecast in terms of the efficacy and safety profile of beraprost. In Japan, it has had a gentle safety profile, and that's very encouraging. However, we have to do the clinical study to see the results. Now the next important data point is that with regard to beraprost, you're going to end up having a label that reflects a morbidity and mortality type of endpoint. Whereas with oral treprostinil, you can have an endpoint, which reflects exercise improvement. So one very logical approach might be that for this large population of -- I would estimate about 10,000 Class II patients for the U.S. or Europe, for whom the ERAs and the PDE-5s have not proven effective. And what you're really looking at is exercise improvement. That would be a logical place to put a patient on oral treprostinil. Whereas for the patient who is perhaps further down the line, but is not quite as able to handle the rigmarole of a parenteral therapy or inhaled therapy, that may be a more appropriate patient for the beraprost-MR. But there are many possibilities in between. There could be the patient who has been rescued with Remodulin and is no longer a Class IV but is now a Class III. And then they were transitioned to inhaled Tyvaso and it continued to do very good as a Class III and now they've become a Class II. And by the way, these are not hypothetical situations, these are actual anecdotal accounts that are occurring in the field right now. So now you've got a patient who has got tremendous responsiveness to treprostinil and the doctor says, "Hey, I could make your life even easier, instead of enduring several times a day an installation regimen, worrying about times when you've got congestion or whatnot, let me shift you over to oral treprostinil, because treprostinil, clearly, is a molecule that's working for you." And we're going to have that situation as well. The bottom line is that there are 2 great prostacyclin analogs out there, beraprost-MR, having great success in Japan. Oral treprostinil proved high efficacy in FREEDOM-M and great safety now, over 1,000 patients. I'm really excited that to be CEO of a company that has both of those prostacyclin analogs. I'm sure they will end up being priced comparably, and hence, UT wins whether one or the other is prescribed.

Thank you, Linda (sic) [Liana]. Thank you, all of you, for your thoughtful questions this morning, for recognizing that the company always tries to lean heavily on the transparency scale with our uploaded slide deck. And for your ongoing support, please, whether you are an analyst or a portfolio manager, I guess -- I know, it's easy to get lost in the freneticness of the moment, but I think you'd have to search long and hard to find a company that has such a great core business and core franchise as United Therapeutics. With our consistent growth in revenues, consistent growth in cash profits year-after-year, consistent growth in the free cash flow area, and now a pipeline that remains very, very full, an NDA going in, in the first quarter of next year, a Phase III trial, next-generation prostacyclin analog, that will be enrolling patients by the first quarter of next year, expansion of existing franchises such as IV Remodulin, approval in Europe expected in the fourth quarter of this year, another pivotal trial of inhaled treprostinil that will likely first enroll patients in the second quarter of next year, neuroblastoma approval going in by the fourth quarter of next year. I mean, this is a company whose pipeline is full, whose prospects are great, and whose core business is solid. I love it. We all love it. And thank you for following us. Talk to you soon.

Operator

Thank you for participating in today's United Therapeutics Corporation 8/24/11 Conference Call. This call will be available for replay beginning at 12:00 P.M. Eastern Standard Time today through 11:59 P.M., Eastern Time, on Wednesday, August 31. The conference ID number for the replay is 94755163. The number to dial for the replay is 1 (855) 859-2056 or 1 (404) 537-3406. You may all disconnect and have a wonderful day.

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