United Therapeutics Corp (UTHR) 2002 Q2 法說會逐字稿

Good morning and welcome ladies and gentlemen for the United Therapeutics second quarter 2002 financial results conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. If you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 255479. At the request of the company, we will open up the conference for questions and answers after the presentation. United Therapeutics remarks today may include forward-looking statements, such statements involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties are described in the United Therapeutics annual report on Form 10-K, its quarterly report on Form 10-Q, and on its Form S3. I will now turn the conference over to Dr. Martine Rothblatt. Please go ahead ma'am.

Thank you. Thank you all for being with us this morning. As you know this day we are announcing financial results for the quarter ended June 30, 2002. First, we are pleased to report that United Therapeutics' total revenues for the quarter totaled $11.6 million; the majority of these revenues were from sales of newly approved Remodulin to our two US distributors. Remodulin injection was approved by the FDA on May 21, 2002, as a continuous subcutaneous infusion for the treatment of pulmonary arterial hypertension and patients with New York Heart Association Class II to IV symptoms. As of today, approximately 500 patients are on Remodulin therapy worldwide and about 60 percent of those patients are reimbursable. Based on a number of reimbursable patients on our therapy. our current revenue run rate is approximately $25 million per year. Currently, Flolan, the injectable continuous intravenous infusion form of prostacyclin, there is approximately a $150 million in a! nnual sales and we continue to believe that that is part of the potential for Remodulin in pulmonary hypertension with an even greater potential being patients who fail to improve on trachlear the oral [endothelin] antagonist, a number which we believe to be about half of such patients. So, we still [got] off to a very good start toward those significant potential for Remodulin in pulmonary hypertension. We are pleased with the results of today given the short time Remodulin has been on the market based on a number of factors besides the revenue growth matched to the potential. This FDA approval, the number of US medical centers with experience in transitioning patients from intravenous Flolan to Remodulin has grown from 3 to 8, which is quite a significant increase and really the main thrust of our business plan and the first [IRB] approval has already been obtained for the safe flow of Flolan to Remodulin transition study, which is sort of really the key pivot point for! Remodulin moving into the Flolan market. We continue to believe that Remodulin is a useful alternative for New York Heart Association Class II, III, and IV patients with pulmonary hypertension for whom either all therapy is inappropriate, ineffective, which appears to be the majority of such patients, also patients who are unable to manage or accept the rigor or the risks including the significant risk of septicemia associated with intravenous therapy.

Overall we incurred a net loss of $3.2 million for the quarter which is above one-third of the loss we incurred a year ago. This represents a loss of just 16 cents per share down from 53 cents per share a year ago. A major reason for the loss this quarter was due to a write-down of marketable debt adjustments totaling $3.6 million. Had the write-down not been necessary due to a rather dismal shape of the [indiscernible] markets, United Therapeutics would have had a net income of $381, 000 or about 2 cents per share for the second quarter of 2002. So, with that overview and summary of the press release please open up the conference call now to any questions, if you questions of scientific or medical nature, I would like you to feel free to direct them to our President and Chief Operating Officer, Dr. Roger Jeffs, who is also on the call and he is masterminding the Remodulin Program, not only for pulmonary hypertension, but also for critical limb ischemia where we are quit! e excited to be on the verge of a Phase-III A study, and Dr. Jeffs is also masterminding the effort of our iminosugars development for hepatitis C where I am pleased to share that we are now well in our Phase-I Program with favorable results to date.

If you have questions of a financial or business development nature, I have also with me on the call our Chief Financial Officer, Mr. Fred Hadeed and he is certainly ready and able to answer any of your questions in that area and finally if there are other general business strategic questions or marketing questions, feel free to direct them to me personally. Operator if you could please open up the call.

Thank you, Mahon. The questions and answer session will begin at this time. If you are using a speakerphone please pick up the handset before pressing any numbers. Should you have a question, please press star 1 on your pushbutton telephone. If you wish to withdraw that question please press star 3. Your questions will be taken in the order that they are received. Please standby for our first question. Our first question in queue comes from [Matt Duffy]. Please state your affiliation followed by your question.

Yes, good morning. I am Matt Duffy from Black Diamond Research. I was just curious what sort of objection the priority and [credo] people are hearing out in the field and what issues they are having to deal with more on the sort of ground level in getting patients either transition from trachlear or more importantly I think from Flolan? Thanks.

Thanks Matt, this is Martine Rothblatt. I think that the principal question that you hear out in the field is that there is concern - continuing concern about putting patients on Remodulin because of the high incidence of side pains that patients experienced and we recently had a very successful Phase-IV investigators meeting where we presented some exciting information that some of the centers have had a significantly lower incidences of side pains than other centers, and we have been able to share some of the protocols that those centers have been using, one which is I would say particularly attractive is called the Wisconsin Protocol out of that center, and I think that as that information disseminates that objection will be very much ameliorated. A second, I am sorry that's number 1.

Number 2 is that these patients are all, you know, pretty fit and any good doctor is not going to [indiscernible] that flippantly in taking patients from one therapy to another when patients are so ill, so people so just like sorting out, okay you know for whom is trachlear right, for whom is Flolan right, for whom is Remodulin right, and who can I actually hold on the sidelines because presently most of the PH doctors are aware that there is a large study of sildenafil a.k.a. Viagra about to be initiated. So who could I know stable enough for me to hold off for now. On top of that there has been a lot a of fluctuation because of a Texas Biotech's sitaxsentan endothelin antagonist which was in the clinic and still is in the clinic, but then rather abruptly all of the [indiscernible] patients who were on open label extension where pulled off from the therapy on the ethical grounds that since there was no evidence that patient were improving on the endothelin antagonist! that there would be a safety risk and therefore unethical to continue to expose them to the heightened risk of liver injury from staying on the drug. So it is taking a bit of time for I think for doctors to sort all this stuff out and with credo and priority health care are just getting to do is present the different options to the doctors to make sure that they are aware of the pre-reviewed studies showing the success of transitioning patients from Flolan to Remodulin and as mentioned we almost tripled the number of centers doing those transitions, and I think it is really the first trickle of what will eventually occur.

Thank you.

Thank you our next question in queue comes from Jason Arrayea. Please state your affiliation followed by your question.

July Equities. Good morning. Congratulations on your first operating profit. I just marked in. My first question would of that do you expect quarters going forward to continue to show operating profits and maybe the won't. The bond market won't collapse on us and they will be gap profits as well?

Well Jason. Thank you for the congratulations. Of course everybody in United Therapeutics is extremely joyous about the results because we are very much bottom-line oriented. Taking your question so back-end to the front-end the bond markets will no longer be an issue because have exited those markets entirely and are all in very safe non-volatile instruments. So it was a good plan initially, as we came out ahead compared to key bill and money market rates, but that is because our timing in exiting was just right, and we wont be going back there anytime in the conceivable future, or perceivable future.

Well it is amazing that Martin how many other companies of our ilk has had Worldcom etc. problems. It has been practically every conference call we have been on this quarter.

Right. In terms of coming forward we are providing the forward-looking guidance of our $25 million a year annual revenue run rate that we are on right now, with 300 reimbursable patients. We of course now that we are just exiting the 90 days sub part H heightened review period for promotional materials. We will be able to get more promotional materials out into the field and we certainly expect to continue to growing. Our patient counts quarter by quarter and as we grow those patient counts we expect the revenue run rate to continue as well. We have been holding our spending pretty close at the $4-5 million a month level that we have been at traditionally. We tried always triage our R and D program so that we stay within that level. We are not the kind of company as mentioned at the beginning of this question that when revenues shoot up, our spending shoots up. That is not our philosophy. So because we now have high margin revenues that reduces our effective burn ra! te down to around $3-4 million currently. And we expect that as more patients come under Remodulin therapy that effective burn rate will drop and drop. And of course it wouldn't be appropriate for me to give a specific forecast of exactly which quarter that we turned our buck permanently but we are working our hardest to get those quickly as we can.

Okay wonderful, and regarding the reimbursement rate of 60 percent, do you anticipate continuing to make progress on that front?

Oh yeah, actually to be curt so no other callers are confused, our reimbursement rate is actually as that phrase is normally understood, it is actually much, much higher than 60 percent. The number of patients who are reimbursed in a jurisdiction whether drug is approved which is for example like just the US right now is over 90 percent. We have recently received positive indication from the first teamwork, which is part of them that's a acronym for the Medicare Reimbursement carrier that they are reimbursing Remodulin and then there are various policies that we in the other three will also be reimbursing. The largest state in the country California Medical has already approved Remodulin for reimbursement though in the US reimbursements is not a problem at all, and so our effective reimbursement rate is over 90 percent. We have actually just a hand-full of what we call Patient Assistance Program [Patient]. What we expect to see though is that as our jurisdiction af! ter jurisdiction around the world approves Remodulin that are higher and higher percentage of our total Remodulin patients worldwide will be reimbursed patients, and in that vein we have been advised but we can expect decisions, which are we believe will be favorable decisions from Canada, from France, from Switzerland, for all of that also has the effective increasing the percentage of our total patients of Remodulin for reimbursable. So reimbursement picture of Remodulin is I think a very good picture and that is in fact the bulk of our effort in the past two months has gone to ensuring that the patients that we have on drug are now reimbursable out drug, and in fact huge step to have go from having 500 patients on drugs for free two months ago to having 300 of those 500 patients on drug for pay.

Wonderful. Martine, give any idea regarding the international approvals when you might start to see those coming.

Our staff has advised me; we have an excellent regulatory affairs group we do unlike some other companies that forms some of the [staff] to CRO [Dean Wands] who is our director of regulatory affairs' top-notch individual has advised us that we can expect this calendar year, so by December to hear from Canada, France and Switzerland.

Great and my last question, there was a firm in Canada with a research study of [dogs] you know, saying that Remodulin was in fact clinically doing better than they had expected and better than previous surveys had indicated. Can you may be talk to that and what the feed back you are receiving from the medical community?

I would like to forward that question if I can, I think that is what everybody is hearing; Remodulin is a great drug, there are now 500 patients you know still being doing so well on it, some of them, many of them now for years, but I would like to defer that question to Dr. Jeffs because he is the medical and scientific profession on the call.

Thank you.

[Indiscernible] I am not familiar with that endless report which is done by survey and that, what I can say is that one of the benefits of Remodulin therapy is that one can titrate the dose to effect, so there is no therapy to [indiscernible] you will and that over time what centers the finding is that they are better able to optimize patients by paying seems to be more manageable over the course of that time and what you have is an improving benefit to risk profile, so I think, that's what we hear from the conations and it sounds like that's what supported by what you are discussing.

Great, thank you.

Thank you. Our next question in queue comes from [Bedley Arfat] please state your affiliation, followed by your question.

Hi, Good morning to you.

Good morning.

I am [without] securities and I am sitting in for Dr. [Burtner], who [indiscernible] in the therapeutics for us. I had a couple of questions now. One, I was wondering if you could give us some [work] prior to, you were discussing some of the concerns that the doctors have using Remodulin and you were discussing this was constant protocol and to alleviate pain. Can you give us any further information on what that might be?

I'd like to suggest that again because it's more of a medical question, make sure that Dr. Jeffs responds to that one.

I think as everybody is aware that - really the only issue with this therapy is localized side pain in reaction. We have been working difficult - diligently to address that. And obviously, with a localized effect, what you want to do is to provide localized treatment. So the best way to do that for subcutaneous treatment would be to give a transdermal application of pain therapy. The issue today with those types of therapies had been their permeability through the dermal. So what this with constant protocol does is provide a matrix and it's an organogel, that readily solubilizes these agents and then passes them through the subcutaneous tissue. So you have a localized effect and the nice thing about that is, you also are not taking it orally or systemically; you avoid the systemic side effects. So you have a concentrated localized effect of very effective pain medication. The scene today indicates that the patients in [Wisconsin] to be quite effective in mitigat! ing the pain that they are having. Though, we are encouraged by that, we are trying to, in a very controlled and scientific manner, disseminate this information to our other clinical sites particular to our phase IV study. We then also introduce this information into our commercial patients to see if we can manage some of the side pain that they may be, may or may not be having so. In essence, it's basically a better way to deliver topical medications to treat the localized side pain.

Okay, thank you. And I have one other question for Fred Hadeed. And that is, if he could give us a breakdown on the revenues for the second quarter aside from Remodulin, I think it is 11.6 million, but I am interested in exactly how that broke down?

We are happy to [indiscernible]. Obviously, the majority of the revenues came from Remodulin, which was 8.7 million for the quarter. In addition to selling the drug itself, we also sell the infusion box, which we acquire from [indiscernible] and then resold to our suppliers. So there are boxes and there are also some miscellaneous supplies that go along with this box. Those sales totaled to 1.7 million and then the next largest source of revenue for us was from our Telemedicine subsidiary, which generated just over a million dollars of revenue, which is about double the level of revenues that provided a year ago in the same quarter. Those are major components of our 11.6 million.

Okay, and one final question I have is relates to your R and D costs, which although it was down from a year ago, was ahead of the first quarter and you mentioned the fact that you [indiscernible]. Is it the OvaRex, ovarian cancer program? As you could give us a feel for how do you expect to ramp up you R and D program and also the [indiscernible]?

I think, as Martine mentioned earlier in the call, our philosophy is really not to ramp up our R and D spending. It is to try to keep at a steady level as we can quarter-over-quarter going forward, so that we can focus on growing the top line and keep our spending level. That's our philosophy on R and D. So we hope to keep that level.

That was nice. How about the ovarian cancer treatment, I am trying to get a feel for your R and D list?

Regarding R and D in the second quarter as compared to the first quarter, which I think is what you are analyzing. There was a spike in the second quarter, which largely related as we said in our press release to a spending on our OvaRex program, which is the program we had for late stage ovarian cancer. There was some large drug acquisition clause that we have to incur in the second quarter in order to obtain some drug material that we could use in testing.

Well, this is Martin Rothblatt, I will add little more color to that. Need to checkup on your question by priorities of R and D spending. The company's first priority is our phase IV program of Flolan to Remodulin transition and as mentioned we have received our first IRB approval. We are under FDA mandate to complete that study within 18 months. So, that's our first priority and I would expect that that spending will become most robust during '03 because its going to take a couple of months to get the rest of the IRB approvals accomplished. And then there is the patient recruitment period. The second priority after that is our phase III program for critical limb ischemia and that is a very exciting program because it is using a drug which we are already producing with great regularity and I would like to pay some credit and encourage the investors on the call to take note of the fact that our manufacturing operations have operated very smoothly for quit! e a while now and we are in fact the first part of our regulatory application to be proved by the agency in terms of their inspections. So we will use the same drug being produced from our Chicago manufacturing facility in a phase III program of critical limb ischemia and that phase III-A trial will be kicked off in just another month or two now. I believe we are just on the verge of finalizing the protocol and that will be a lot of enrollment in the second half of this year and then we hope to move to a phase III-B study in '03, which will be a typical study and have even greater level of enrollment. So, I think you are going to really see you know significant spending on CLI (critical limb ischemia). And just as a recollection, I recall that there are over a 100,000 patients a year just in the US alone with critical limb ischemia that is now treated surgically and there are about three times that number of patients who are surgically treated with inadequate result! s and are on discussions with surgeons, which have been headed up by [Dr. Michael Way] the head of this program for us, it has been that surgeons would welcome a prostacyclin analog adjunct to the revascularization surgery to achieve superior results in this class of patients. So, really it's a very very exciting program. Then third in line after that is our phase III program for ovarian cancer, which as Fred mentioned we recently had to purchase a substantial amount of drug supply. This is a murine monoclonal antibody, so it is not an easy drug substance to make and you sort of have to get it when you can in advance of need. So those are - that kind of answers your questions in terms of the priorities; what's really exciting to me compared to other similarly situated biotech companies is that here we are with a unapproved drug Remodulin for pulmonary hypertension and two phase III programs all going forward with an effective burn rate of $3 million to $4 milli! on per month.

Okay, thank you very much.

Thank you.

Thank you, our next question in queue comes from [Steve Saber]. Please state your affiliation followed by your question.

Yes, it's Steve Saber from Kilkenny Capital Management, my congratulations to the other people first and then secondly as far as clinical, are you guys thinking of doing clinical trials of Remodulin in combination with trachlear or Persantine and also are you looking at the possibility of clinical trials of Remodulin as an intravenous agent, perhaps just to completely replace Flolan as just a better drug subq or intravenously for patients who are, you know, are perhaps very severely ill or can tolerate the intravenous routes? Thank you.

Dr. Jeffs could you please address those concerns?

I think, firstly trials in combination with trachlear, what we are really going to do is just empirically try to track the data for patients that are failing that therapy for one reason or the other, be it adverse event profile or lack of benefit when Remodulin gets added, we will track the additive effect of Remodulin therapy to those patients rather than a specific control trial per se. As for intravenous use, certainly we are not labeled for intravenous use. Our label is specific to subcutaneous delivery of the drug. There is a lot of investigative interest, as you no doubt surmised, to potentially use our drug intravenously. We are going to support investigated driven studies to look at the chronic benefit of prostacyclin therapy with Remodulin and given that it is the prostacyclin we are very optimistic that it will provide some benefit to the patient and can be used safely. So I think in the coming months, you will see some data generated by investigators under th! eir clinical research programs, testing the Remodulin therapy given intravenously and that type of information will support either further studies or further use of the drug that way, but certainly it is not something that we are promoting given we have not really studied it in that manner.

Okay thanks and one followup question, I do understand that company - the product sales for Remodulin at the run rate right now or will be at the run rate at some point this year of 25?

No, that is our current revenue run rate, right now.

Great thanks.

And that fact does not factor any additional growths into the calculation.

Great.

We define revenue run rate as if we have the current number of reimbursable patients right now and that current numbers stays on for 12 months; that would be our revenue in a period of the next 12 months.

Great. Thanks.

Thank you, our next question in queue comes from [Matt Taplet], please state your affiliation followed by your question.

[Quaker] Capital Management. Congratulations on a great start. Few questions here, on the bond losses, just so I understand it properly, I guess we are going to see a further writedown in Q3 numbers and could you be more specific about where the losses occurred?

Yeah, I'd be happy to Matt, as one of the previous caller pointed out, nobody has really been immune to the recent disasters in the bond markets and we were not immune either. We did have a small portion of our investment of our total investments in Worldcom as well as some other telecom and energy companies. The portfolio itself is fairly well diversified over 100 issuers, various ratings, various maturities. It was overall short term and the thing that we could not control against would be, you know, people falsifying their earnings and unfortunately we like many others got trapped in the Worldcom disaster. We made a conscious decision in reevaluating the portfolio, the [movements] were less volatile instruments, such as treasuries and money markets. And so in July we exited the portfolio; that did result in the additional loss that you mentioned of about $3 million and so all in all we did suffer just over $6 million in losses on the portfolio. The good thing, ! if you can view it as a good thing, is that when we look back retrospectively on the whole portfolio for the previous year-and-a-half, that is the time period that we were invested in dead securities, our average yields was 2.4 percent and that includes the effect of not just the loss that we booked in this quarter, but as well as the additional loss in July. And that fares very well against money market rates as well as against treasuries over that time period; in fact it's head and shoulders above what the money market rates would have provided in that period and it is within the range of what one- and two-year treasury securities would have provided in that period. So we feel that we were able to walk away with our principal intact and can look forward in a much less volatile situation with our money invested as I said in money markets and treasuries.

Great. Thank you for the details, two more questions here. Any comments on the transition by Gentiva to Accredo?

We have met with the top officials of Accredo. Robert [Risigno] who is head of our commercial development effort works with him quite closely. I think they have been doing a super job of having patients on to Remodulin. We have benefited greatly by recently hiring one of the former top of Flolan managers from Gentiva which was the predecessor to [Credo J. Watson] who had been with the Flolan program basically from its infancy at Gentiva and I think one would be hard for us to find anybody in the country who knew the [aid Z] of Flolan commercial development better than [J. Watson]. So we have been very proud to have him join our United Therapeutics Team. It has been a very good transition for us.

I will agree on that [indiscernible] you can hire, any comment at all in terms of performance of your [dual] sellers, one versus the other.

Now they are both super companies, they both have their own respective strengths, priority health care, has a superb track record in the distribution of chronic therapy. They have been doing an impeccable job of managing the majority of the patients who have been on Remodulin during the clinical trail period. So they have got really no learning curve to go up here. They are already up on it. They have an excellent website (ph neighborhood.com), that many patients [arrived] upon. They have had good exhibit boost at the major medical conferences, their PH associations, patient's association, [Accredo] of course they have the benefit of having you know upward to 2000 Flolan patients as well as also distributing trachlear. So they know first hand, pretty much patient by patient, you know, which patients are not improving on trachlear and they also know which patients' are - and which centers are having the most problematic experience with Flovent in terms of heig! htened infection rates, but I think really we could not ask for a better dynamic dual of distributors than priority and Accredo.

And there have been no conflicts issues given the distribution of other [relevant] drugs.

No, no. they - everybody is extremely professional.

Okay, can we talk a little bit about - I guess, the additions or losses of patients within the US just - I guess in relation to your comment that I heard that Dr. Jeffs stated that the initial progress is on I guess transitioning - or did I misunderstand that initial focus is on transitioning of Flolan in patients as opposed to putting [indiscernible] patients on Remodulin or do I misunderstand, and just in general could you indicate how many new patients were added on Remodulin in the US in the quarter and I guess conversely how many came off, or for - and roughly for what reasons.

This is Martin again, we stayed away from - in the press release and other by getting in to real particularize patient by patient counting and [I will tell the reason] why is - I got so much of bouncing around numbers from different sources. I couldn't really feel comfortable in this exactitude of any real specific numbers like 8 patients went from this to that or 7 went from this to that, and it is really not surprising if you take a look at the chain of information you have got you know a doctor in a clinical center knows what's going on or may be the doctor's nurse knows even better what's going on and then you have got the distributor who is in contact with the center and there is often a lag between what the doctor does with the patient and what the distributor knows and they [shift] drug monthly in they are not necessarily in personal contact with each patient monthly and from the distributor you have to back up another step to our own sales and ma! rketing team and then finally [gets] up to the executives in the company. So first - I am sorry to a bit long, [winded] but we thought about that and may we could say that there was, you know 7 did this and 8 did that and it is just those numbers are not precise enough, so we don't like to do that. What we can say are things, which we feel comfortable about or accurate like, 500 patients are on therapy. Well when we launched therapy a couple of months ago we had 500 patients on therapy. So about as many we have added new patients on. We have had patients drop off. So about as many patients have been added on, has had dropped off, for example we gained patients from Flolan to Remodulin, we have lost some patients from Remodulin to Flolan. We gained some patients from Trachlear to Remodulin, we have lost some patients from Remodulin to Trachlear.

Not much, you know I think that's responsive to your question in terms of magnitude. I can tell you the number of patient of our patient's who have changed from one therapy to another, is on the order of about a dozen in the past quarter, and in the case of each therapy, so about a dozen either way and it all netted out so that we are at 500 patients now, we were at 500 patients couple of months ago.

Is there been material difference in that change in the US versus Europe in terms of the adds or the losses?

No I think it's pretty much the same, same pretty much thing going on, there are, with that Flolan transition centers in Europe. They are Flolan available in Europe. There is Trachlear available in Europe. I do not think it's really significantly different. The only big difference is that we get most of our paying patient are in the US. We do have some paying patient in Europe, but most of the paying patients are in the US.

Okay and just in general did I understand correctly that with the initial focus is on transition patients?

Yeah! I think logically Trachlear you know Trachlear's story if you will is pretty much you know try the pill first, why not try the pill first. And I think nobody could really disagree with that. That's you know generally speaking that make sense. You do have to go ahead then look at your subpopulation site well. Is it a patient's who [indiscernible] compromised. For example there are upwards you know 300,000 patients with cirrhosis in the US, and pulmonary hypertension is the frequent and concomitant problem of cirrhosis. If it is you know one of these 300,000 cirrhotics, so do you want me give them an endothelin antagonist. Now I don't think anybody is going to do that. So but in general you know for your plain vanilla PPH patient Yeah! You know try the pill first. Again is it a cost, you know two patient or cost three patient then you know therefore it is the drug on label or off label. Are they medicare or not medicare and these are all rei! mbursement questions that as to be addressed as well. Will they be able to comply with the monthly liver monitoring. Are they going to [indiscernible] child bearing. You know these are all questions that's why you would not automatically put everybody on the pill, but it is worth. It is like a first line consideration. On the other hand, with regard to the Flolan population, you got a population of people who face per the label of 0.3 per year incidents of sepsis. In addition to a very challenging life style with a very intrusive therapy. So, it is quite logical that the safest thing to do is to first look at you know taking patient's from Flolan to Remodulin. In that vein it would be good to have a evidence that the patient who is taken from Flolan to Remodulin did as well on Remodulin as they were doing on Flolan and I think at least you know lot of insite into that answer will be gained from our phase IV study, and we are doing exactly that. But taking ! people who are on Flolan and transition them to either placebo or Remodulin, and if the one transition to Remodulin do as well as when they were on Flolan you know that's tells you a lot. So yes, logically our focus is on the Flolan transition not to the exclusion of the de novo, there are many de novos who would be quite logical candidates for Remodulin. And then finally there is third category of the patient's who fail to improve on Trachlear per their critical trial data 55 percent of the patient did not improve after four months on Trachlear, and these were basically cost three and four patient. So these are very sick people who are getting out of breath walking at the few steps. And if they are not going to improve in four months you know eventually every doctor would say time to try something different, prostacyclin is a proven performer. So we think between the people not improving on Trachlear, the people having difficulty with the Flolan delivery syst! em, and the de novo's for whom a pill is not the most logical alternative there are plenty of tributaries flowing into the into the Remodulin river.

Great, if I may ask a couple of more quick questions. How many phase IV centers do you anticipate needing for the study?

I would like to defer that to doctor Jeff.

Yeah, currently we have 10 centers targeted and we have interest from 15 and we are trying to keep it fairly select group of centers and to do a 100 patients that is well within the [indiscernible] timelines that we will need to commit with the FDA.

Okay you are referring to the IRB procedures, but you should know [indiscernible] time limit sounds like?

Now, we have already got 10 recruited. We have initiated five of those 10 and which is waiting on the paper work so we can start patients.

Okay then a couple of quick question as recurred on the financial side here, March that our work were pretty impressive this quarter. I am wondering whether you use the long-term margins, I assume the [indiscernible] and accessories are more secure [indiscernible] margin and drug?

That's correct, Matt in fact there really is no margins to speak of on the pumps and the supplies. We have never intended to make it a business out of selling those or we want to leave that margins to the distributors and the, you know, long-term guidance we always given is that Remodulin ought to be able to produce a margin at or in the area 80 percent.

Ok, and you must spare me one last question, it's not a question bit of a statement, but I guess I would strongly encourage you to work even harder at the operating expenses I think you guys have done a good job of controlling them, but except you can accelerate profitability or I think it is worth pondering evaluations the market attaches to profitable versus unprofitable bio-techs and the disparity is startling.

We work for you guys and we appreciate that input.

I mean I only pointed out there are profitable biotech on a average straight to the PE of twice the best the pharmaceutical company's in the world. So I would think about that.

Okay we appreciate that and it well advised and we are constantly reviewing budgets and programs.

Thank you.

Next call. Is there any more, operator?

Yes, the next question comes from [Sameer Devani]. Please state your affiliation followed by your question.

Hi, it's Sameer Devani from J.P Morgan. Just a very quick question. Out of the 500 patients that you have how many did you recruit since May 21?

I am not sure if you heard the response to the previous question that Matt gave, but it's not possible to actively get into individual patient by patient counting and as I just now responded in the previous question we have lost some patients, we have gained some patients. We have 500 patients on drug a couple of months ago. We have still got 500 now, significant thing is that two months ago all 500 were free patients and now 300 of those 500 are paying patients.

Okay, are you giving out any guidance on what your estimated figure of number of patients will be by the yearend?

No we are not, but we are currently at a revenue run rate of $25 million per year, and as we add more patients the revenue run rate will increase.

Okay, may be just one final question on, you explained that you have made about half of the patients from [indiscernible] benefits, I won't say I appreciate that you provided from the clinical trial but the discontinuation rate that they have actually announced is very low. Can you give us some sort of indication as to what you would think would happen, is this the case where do you think patients would suddenly stop trachlear and may be using Remodulin in conjunction or -and if and what would you think that will Remodulin simply added to treatment?

I would have to, I personally would not comment on that because it is getting pretty far off field that I was only going by the publicly available pretrial data, but refer to Dr. Jeff that you have any comment on that.

But I think what they announced is their drop off rate due to adverse events which is around 5 percent due to liver toxicity, what I am unaware of is what their drop out rate is due to lack of improvement and I think when you have a drug that has a fixed dose in essence you have a therapeutics feelings though the patient does worse and there is really nothing you can do with that therapy to salvage that patient other than add additional therapies like Remodulin and Flolan, so we are obviously trying to determine what that other component of the drop out is, that to my knowledge they haven't really reported that anywhere.

Okay, you are not disclosing the number of patients that you have on trachlear and Remodulin at the same time?

No because those numbers are small, and at that level of smallness the [arrow bars] are pretty high, but it's less than a dozen.

Okay, thanks a lot.

Thank you, our next question comes from Mark [Atlianti], please state your affiliation followed by your question.

Good morning, Alliance Capital, Martine, Fred, and Dr Jeffs, and the rest of the company congratulations on your first commercial career. Wanted to go through the numbers again because, not sure, I am understanding, I am not sure, I am doing the calculations correctly. You are on a $25 million a year run rate, you did $8.7 million in Remodulin sales. So, I calculate a run rate of almost $35 million. What am I doing wrong with my calculator?

Nothing too much Mark, and it is a bit confusing. This is Martine, the part of the drug that was purchased was for immediate use and part of it for inventories and [CDAV] distributors want to be cut short on something that the patient desperately need. So, that is one reason why we told [indiscernible] to go ahead and just multiply the amount of drugs sold in the quarter going forward because [indiscernible] for inventory. The way we get to the revenue run rate is that we take the number of reimbursable patients, that is we have 300, and we multiply that by as best as we can tell the average amount that each patient is paying for drug per year and multiply that out. So, equivalently, you can take on your calculator you can take 25 million you can divide it by 300 and you will get an average revenue per patient, and then you could use that going forward as the company reports it has 400 paying patients to a rough order approximation 400 times average revenue per patient w! ill give you the instantaneous 12 month's revenue run rate.

Now, if I did my numbers right, it looks like the average revenue per patient is little over $83,000.

That is correct.

Which is significantly when like the occasion on the road where we were talking, I don't know, 40,000 to 50,000 [analysis] numbers or something?

Yeah, that sounds right, that sounds right.

So, I guess it's no longer the patients are on therapy, the more expensive patient, it may become?

That is correct, except if in the [indiscernible] automatically levels out, each patient requires a different amount of drug to have their therapeutic optimum benefit, bigger people require more, smaller people require less. It depends also on whether they are class II, III or IV patient or depends if their PPH or FPH so this is the drug like Flolan that a doctor has to tread on carefully, keep in check with the patient each month and tell them to increase the dose by so much, but right now, when we started the business a few years ago, it looked like the, from our estimation that patients reduce like $40,000 to $50,000 of drug a year and now with the wisdom of our experience, its more like the $80,000 plus a year. I should add. Mark, whether in fact it helped make sense of the discrepancy is that most of the patient's that we have on Remodulin right now have been on Remodulin for quite a while and similarly when we transition the patient from Flolan to Remodulin, the! y come on a much higher dose because there is the period that you already mentioned on Flolan, Remodulin transition, told that people use about 90% or so or 80% as much, Remodulin as they do Flolan. So, if they had been on Flolan for couple of years and they have added with the sepsis and with the freezer pack and what not they change onto Remodulin, they come out at a pretty high level. On the other hand, naive patients who first come on the drug, the cost of the drug for a naive patient that they know the patient who first comes on, is around $40,000.

And, secondly, I mean, I calculate you have over $7 of share cash is that about right?

Yes that is correct

And then you have an FDA approved product with the revenues and you know, certainly a market [Cap] - that if someone tells you these facts given your, you know, your revenue run rate - you wouldn't think the market Cap might necessarily where it is right now, so I am trying to figure out, do you think it is because the run rate is at, say 25 million and people, they generally followup the market with much larger and now its just this small product or this a run rate just the beginning of may be addressing a much larger market, is which - is that something you think?

Mark, neither the kick off revenue run rate out of the [starting block] 25 million is really exciting and I think that is a very positive start toward the Flolan revenues of 150 million and the (trachlear) nonimprovements, which would be hundreds, if not thousands of patients over time. So, I think it is a beginning of something much bigger. The best, you know, none of us are smart enough to really, you know, understand everything about the market but the best [metaphor] that we see is that we are like a talented singer (indiscernible) singer if you will in a stadium of screaming soccer fans and right now people just don't hear us and if they did, if the stadium quieted down with the, you know, with all the stuff going on in the market right now, suddenly you would hear this beautiful voice and everybody would focus on you and that beautiful voice would be United Therapeutics.

Lastly, I would let you go, just a followup to my [indiscernible] question, what I am trying to get at, is originally analysts that follow the company before had market estimates, I think a minimum of 250 million and up [links] of that and if I recall again - I don't have the reports in front of me and some had significantly higher than 250 million. Do you know really today the size of the market, is that a real number 250 or is that is it smaller?

Oh no, it is actually, we think it is probably larger in large part, I think thanks to the efforts of (indiscernible). We feel that (indiscernible) just really, while on one hand they are form of competition on the other hand they are sort of our best friend. Because as they aggressively shake the bushes and [medicalized] more and more people with pulmonary hypertension many people who never thought they had pulmonary hypertension due to the marketing efforts of (indiscernible), asking doctors to check patients for this and (indiscernible) them for this, more and more people are getting medicalized for pulmonary hypertension than never before. In fact, I would say in the last year, more people have been medicalized with pulmonary hypertension in the last year and probably in their previous three years combined. Thanks in large part to the efforts of (indiscernible). Well, all of those people have to now be added on top of the preexisting markets which is the Flolan mark! et, although the total market potential is much larger than [thought] of initially and as mentioned initially we have got the 150 million Flolan market plus the half or more of the people that don't improve on trachlear, added on top of that and then on top that the very exciting potential and critical [lung] ischemia where there are literally hundreds of thousands of patients who have been shown to benefit from infused prostacyclin therapy.

And you would be disappointed if you didn't get the average percentage in time or you - that you wanted the market or

We will be disappointed if we are not the major name in prostacyclin therapy.

Very good. Thanks again. Congratulations.

Thank you, Mark.

Thank you. Our next question in queue comes from [ken Martin Alpine]. Please state your affiliation followed by your question.

Good Morning. Ken Martin Alpine with Emerald Asset Management. Just a few questions on the phase 4 trial, how many patients?

Roger can you answer that.

Sure Ken, it is hundred patients randomized one to one.

Okay by and by. How about the end point for this study?

Yeah, the end point is clinical worsening, so once patient is for transition to either Remodulin or [indiscernible]. We are looking for symptomatic worsening of those patients and if they worsened they have been rescued with intravenous [flow line]. Our anticipation obviously is that, that will happen more often on the [indiscernible]

group than the active group.

Of course and final question is when can we see some more data especially when will you be presenting at some upcoming scientific conferences?

Yeah a good question now.

Thank you.

We are probably working more on a publication effort rather than a presentation effort per say.

Okay.

But, I am not sure when our next presentation is in fact at this point.

Okay. Great. Thanks very much.

Okay, we've turned about one hour, so I would like to ask the operator to take one last question.

Yes, our last question comes from [Kemoy Reiley] please state your affiliation, followed by your question.

Yeah. [indiscernible] Hi. Just wanted to may be sort of summarize although data points that have been finer indication, can you get a sense of and what the opportunity is in pulmonary hypertension in CLI. So if I understand correctly, [indiscernible] flow and switches, the most obvious candidates for the drug would basically be any patient so also doesn't improve on [indiscernible] and then patients that can take frequent [indiscernible], so that will be, patients who have liver disease and pulmonary hypertension and you suggested that the number of liver disease patients is about 300,000 and if I understand correctly about at least 1 percent of those have pulmonary hypertension?

Yes, that's well document in the literature.

Okay. So that would be about 3000 patients and then I understand that it's about a few thousand patients or 2500 patients on [indiscernible] so, if the real world experiences anything like the clinical trials that would suggest that a couple of hundred would be experiencing worsening and may be or close to a thousand aren't showing any improvement?

That's correct.

Okay and the average pricing currently is about you are seeing in the market about 80,000. Is that the number that one should if one is trying to size the market; I mean you previously stated 50 but you know looks like once these all get to a normalize level of drug, it looks like it's more or like 80,000, is that so would that be a better price point to use if your kind of trying to estimate the market?

That's our current experience.

Okay and then finally is about to see a [indiscernible] opportunity, I think you stated this about 300,000 patients that would be candidates for therapy on Remodulin?

That's correct. Those statistics are well documented by American Heart Association materials.

Okay great and then what will be pricing be like for that if it's 300,000 patients, you know, what would be dose of Remodulin be for that and you know just a sort of get a sense of you know, what the size of that market opportunity is?

Well, it's a little bit premature to speculate on exacting the dose, because of course that depends on the phase III studies that Dr. [Raid] and Dr. [Jacks] will be carrying out shortly.

Right.

But I can give you some data points on that.

Okay.

The [Ivaprost] which is a Europeans' sharing product and also an analog of prostacyclin, I should say a weaker and shorter acting form of prostacyclin, than Remodulin, but nevertheless, in analog of prostacyclin. They have published a number of studies of intravenous Ivaprost in patients with critical limb ischemia and those studies are all collected in a compendium proceedings of the trans [indiscernible] cardiology society and there was a trans [indiscernible] consensus statement of American Heart Association, American culture cardiology, European culture cardiology and every other culture cardiology in town and all of these cultures of cardiologists agreed that Ivaprost had shown itself to be effective in addressing critical limb ischemia in about a half dozen well-controlled studies that they are in their end point. In all of those studies, the dosing of Ivaprost was about 6 hours a day and had a fairly low infusion rate of few nanograms per qo per minute. So let! 's say for example if we were to go [indiscernible] and say what that really means is that a typical prototype copy that data over to Remodulin and can effect on the assumption, you know there is some data to speak the assumption right now, but if you were to do that, that would say that a typical CLI patient on Remodulin would pay something like one eighth or so of the amount that the PH patient is on Remodulin and the reason I say one eighth, they pay one fourth, because that they are using the drug only 6 hours a day instead of 24 hours a day and then another half of that because instead of being on a average dosing of Remodulin, they would on a light dosing of Remodulin.

I see.

Roger Jeffs: That means basically 10,000 bucks a year to translate into numbers. That number is also a very rational number from another standpoint. There is a good amount of data saying that the current comfort care for a critical limb ischemic patient in terms of surgery and support of therapy is in the range of $10 to $20,000 per patient per year. So it is in a range that the payers are comfortable about reimbursing, they are not taking somebody up in the order of magnitude so now on model we would be quite pleased if things although dark that we could price our Remodulin therapy for CLI. Again this is subject to FDA approval of a label for CLI and clinical trials and other stuffs. As the $10,000 per patient per year, and you are looking at probably a billion dollar plus market if any kind of a reasonable penetration right.

That's great. Okay. So again if you can summarize then so in pulmonary hypertension, you have currently on drug, you could have upto 1000 patients who could potentially benefit from adding Remodulin. Those patients are on [indiscernible].

Yeah.

Number 2. Patients with liver disease who can take [indiscernible], this is about 3000 or more of those.

Yeah.

And then stage 3 is beginning in the third quarter for CLI.

That's correct.

And that's 300,000 patients had an annual cost, if we just extrapolate from I guess from the literature, it would be around $10,000 per year.

Correct.

Great. Thank you very much.

Well, I would like to thank everybody who especially AT and T providing us to go over the hour of our time period here to take in the last few questions. We appreciate everybody's input. We appreciate your congratulations. We work hard to product operating income this quarter and then we will take heart the good comments made by the investors to focus on the bottom line. Thank all of you very much.

Thank you. Ladies and gentlemen, if you wish to access the reply for this call you may do so by dialing 1800-428-6051 or 973-709-2089 with an ID number of 255479. This concludes our conference for today. Thank you all for participating and have a great day. All parties can now disconnect.